Housing starts fall 'well short' of government targets in first three months of national accord

Although the construction industry is off to a strong start in the first three months of the National Housing Accord, the federal government’s ambitious plans to have 1.2 million new homes built over five years from mid-2024 are falling short, according to Australian Bureau of Statistics data.

The latest figures reveal 43,247 construction starts for new homes were recorded in the September quarter last year, up 4.6 per cent from the June 2024 quarter and 13.9 per cent higher than the same quarter in 2023.

The strongest growth was in new detached house starts, which surged 20.5 per cent from the three months to the end of June last year and up 5.3 per cent over the year to September 2024.

But according to Master Builders, the current pace of construction starts for the year to the end of September totals 165,048 which is “well below” the 240,000 annual target outlined in the National Housing Accord.

Master Builders says that, based on the current rate of construction, the national total will hit about 825,000 by mid-2029 – 375,000 short of the government’s target.

The Housing Industry Association has also delved into the latest data with the industry body’s senior economist Tom Devitt noting that higher density housing development is tracking at its lowest level in more than a decade.

"(The sector) has been particularly constrained under the weight of uncertainty in tax settings, skilled labour shortages and regulatory imposts,” says Devitt.

“A significant pick-up in multi-unit starts is urgently required to meet the housing demand of recently elevated net overseas migration. This market segment is crucial to making inroads on housing affordability and improving home ownership rates for first home buyers.

“At a minimum, it is necessary for the volume of multi-unit starts to double from current levels to contribute sufficiently to the 240,000 homes per year needed to achieve the government’s housing target.”

Master Builders Australia CEO Denita Wawn agrees that the industry’s performance in the apartment sector is key to meeting the National Housing Accord's target.

“Apartment construction levels remain too low because the investment appetite is not there,” says Wawn.

 "Low productivity, labour shortages, costly and restrictive CFMEU pattern agreements, a lack of supporting infrastructure and a high inflationary environment all contribute to project costs not stacking up.

"If we are going to solve the housing crisis, we need to build more apartments and make them more attractive for people to invest in - only then will we see a lowering of rental inflation and more homes for Aussies.”

The latest housing starts figure is 35 per cent below the industry’s peak of 66,485 recorded in the June quarter of 2021. That total comprised 42,343 starts for houses.

Despite the uptick in housing starts for the latest September quarter, the number of completions of new houses was flat compared with the June quarter. The challenges facing the apartment sector were reflected in the 5.5 per cent fall in “other residential”.

In seasonally adjusted terms, 44,884 dwellings were completed in the September quarter. Private new houses accounted for 28,677 of this total, which was up 0.2 per cent from June, while private new “other residential” completions fell to 14,860 dwellings. 

Under the National Housing Accord announced in 2023, the federal government is providing $3.5 billion in payments to state, territory and local governments to support the delivery of new homes.

The government is also providing a one-off $2 billion payment to states and territories through the Social Housing Accelerator payment to deliver a permanent increase in the stock of social housing.