ABS housing commencements show unit construction now a ‘train wreck’, nation needs to build 260k homes a year to meet target

Australia missed housing construction targets so badly in 2024 that instead of building 240,000 homes a year to fix the housing crisis, we now must build about 260,000.

Australian Bureau of Statistics data released today has revealed the nation commenced work on just over 168,000 homes last year.

It was a 3000 property increase from 2023, but still fell 72,000 short of the 240,000 annual builds needed to reach the National Housing Accord’s 1.2 million new homes target.

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The Housing Industry Association has called the 3000 extra homes negligible and warned that for the past two years the country has built its lowest number of homes in more than a decade.

Chief economist Tim Reardon said shortfalls early on in the Accord’s timeline would have a compounding effect as they would need to be made up in the years ahead.

“We now need to build 260,000 every year — so it’s getting harder,” Mr Reardon said.

“And if we don’t build 1.2 million homes and sustain that level over many years, the housing shortage will become more serious and all indications are that rising house prices and declining affordability will continue.”

Housing construction has persisted at oits lowest level in more than a decade for the past two years, despite governmnet hopes to boost the figures.

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NSW is being blamed for the worst of the shortfall, with Mr Reardon noting the nation’s most populous state started work on just 21,000 new houses in 2024, about 1000 fewer than in 2023, while unit commencements plunged about 3500 to 20,747.

Nationwide the number of units to have building works commence fell to 60,817 — the lowest number since 2011.

“That’s a train wreck,” Mr Reardon said.

Victoria had the next highest number commenced at almost 19,000, but it too was down by close to 2000 compared to 2023.

The state recorded a 1000 home increase in commencements for new houses to just under 34,000.

Queensland’s home builders started work on a combined total of 35,000 houses and units, about 2400 higher than in 2023.

In South Australia commencements reached about 12,000 — up from just under 11,000 a year ago.

Sydney’s apartment market has far fewer homes being added to it today than it did several years ago.

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A surge in Western Australia resulted in a more than 6000 home build commencements increase in the past 12 months, bringing the state to 19,305 in 2024.

Tasmania, the Northern Territory and the Australian Capital Territory all recorded substantive declines for their local market, but the reductions totalled at a bit over 1100 combined.

While HIA is expecting numbers to pick up this year as interest rates come down, the economist warned that skill and land shortages meant homebuyers would likely see the cost of building rise as more people sought to build new properties.

Mr Reardon added that the most significant election promises being made for housing so far this election were multi-billion infrastructure pledges from both of the major parties.

While this wouldn’t translate into new homes for years, he said it would help reduce the price of new homes when they did start coming online.

In the interim, Mr Reardon said every bit of help from government grants and tax concessions was important.

Slow building approvals are expected to hurt homebuyers long term, with rising home prices expected to persist unless significantly more homes are built nationwide.

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However, he lamented that ongoing high taxation of new builds would remain a major sticking point for many prospective homebuyers into the future.

Even a Coalition pledge to allow first-home buyers to effectively negatively gear their home, which could have a $55,000 benefit for most in a year, would not cover the cost of GST that went into building a home, he said.

Master Builders Australia chief economist Shane Garrett said detached house starts falling 6 per cent during the final three months of 2024 had been a concern, but the a 7.6 per cent hit to higher-density housing numbers was more worrisome.

“Higher density home building has been stuck at a low ebb for years, and the insufficient output of new stock here is a major culprit when it comes to deteriorating affordability in the rental market,” Mr Garrett said.

“The performance of higher density home building will be pivotal in determining whether or not we meet our Housing Accord targets. Today’s figures show that the struggle has got even tougher on this front.”

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