Deplorable housing crisis can be eased
There is universal anger and frustration about everything to do with Australia’s housing crisis, and widespread cynicism of the undertaking in the Albanese Government’s Housing Accord to see 1.2m homes built between FY2025 and FY2029.
The target requires 240,000 homes to be built annually, yet the Australian Bureau of Statistics (ABS) reports the number of dwellings where construction commenced in the June quarter, declined by 4.4% to 45,156, and those completed dropped 6.5% to just 40,524.
It was the lowest quarter of dwelling completions in 11 years, and total dwelling completions in FY2025 fell 2% to 174,030, down from 177,600 the previous year.
This means that since announcement of the Housing Accord, only 27% of the required number of 240,000 homes had been built (in other words, 65,970 short of the government’s target). And that means the proclaimed aim of 256,000 completions annually to reach the promised of 1.2m dwellings by 2030, looks like nothing more than pie in the sky or outright deception.
So, what’s gone wrong?
There are multiple reasons for what’s gone wrong but that doesn’t mean there isn’t a fix for much of it. There is.
Construction has stalled because interest rates have remained high, building costs have increased 40% since the pandemic, residential lot values have risen by about 33% since then, there have been labour shortfalls in the building industry caused by demands from government infrastructure projects, and all this has led to the collapse of many home-building companies.
Accordingly, Stuart Penklis, CEO of award-winning property developer Mirvac, told a recent Citibank investment conference that many building firms are putting off staff, there’s an increasing shortage of apprentices which is hindering housing supply, and he therefore expects a further downturn in Australia’s construction sector next year.
Just 10,165 people completed apprenticeships in the first quarter of this year, the lowest number in a decade – except during the pandemic – and it has been in construction trades when declines have been steepest.
Net permanent and long-term arrivals (NPLT) in Australia, increased to hit a record high in the first eight months of this year, and has further worsened the housing problem.
This year up to August, there was a record 379,870 NPLT arrivals, up 22,940 (6.4%) from the 356,940 who landed in the same period last year and 57.4% more than those who arrived during the same time frame in 2019 before the pandemic.
Historically NPLT arrivals closely track official net overseas migration (NOM) statistics that are published with a six to nine-months delay, so it’s reasonable to expect NOM is also rising, and explains why the federal government has recently announced it will update its plans by 25,000 students to accommodate 295,000 of them in 2026.
But the effect of this will be to pull more construction workers and tradies away from home building, thus intensifying the housing crisis by heightening demand in the rental market where the number of dwellings listed for rent nationally compared with the vacancy rate, has collapsed to a record low.
No wonder there’s a housing crisis.
Wherein lies a probable fix?
Given multiple causes referred to earlier, and that people with intimate knowledge of the home building industry are directing their minds to finding how best to find a way out of this mess, Macks Advisory doesn’t expect it can propose anything that will provide a complete solution to the problem.
However, we can at least refer our newsletter readers to something we believe is attainable and will go a long way towards not only arresting the current decline in home building but turning it around to an increase.
Indeed, it’s the stated claim of The McKell Institute’s chief executive Edward Cavanough that thousands more new homes could be built annually in the next five years than are now being built, if tax rules Labor has resisted for far too long could be “tweaked”. (The McKell Institute is an Australian public policy unit founded 13 years ago, dedicated to development of policy ideas and public debate that focuses on finding practical and innovative solutions to contemporary national challenges.)
Mr Cavanough says tax breaks should be given to investors in new dwellings, if Australians are to get the government targeted 1.2m homes by 2030.
Among proposed “tweaks” the Institute has submitted to the Federal Government, is one to capital gains tax (CGT) for investors that includes a 50% discount for new units but a reduction on discounts for detached dwellings.
Edward Cananough believes: “This is expected to be a circuit breaker that will likely see an extra 130,000 homes being built by 2030. The CGT is neither good nor bad, but it can be better calibrated to achieve our social aims.
“Instead of encouraging property investors to bid up the price of existing stock we should be encouraging them to contribute to the construction of new dwellings.”
Adelaide hard hit by crisis
According to JWS Research eight in 10 voters are amenable to the Federal Government pursuing broad tax reform that includes “some of the more complex and difficult reforms”. A survey has shown that 23% of Australians “strongly support” broad system reforms and a further 33% “somewhat support” reform, while 26% say they’re “neutral” on the issue.
Meanwhile the housing crisis hits Adelaide hard. For decades its housing was the most affordable or close to most affordable -- relative to incomes -- of any Australian capital city. But now, because dwelling prices have surged more than 90% since the Covid pandemic, Adelaide’s affordability has
dropped behind Melbourne, a city more than three times its size. Relative to citizens’ incomes, Adelaide now ranks as having the sixth most expensive housing in the world where, since 2020, rents on newly advertised properties have risen at least 50%.
Macks Advisory’s conclusion? The housing crisis was never inevitable. It’s the result of a catalogue of inept policy choices, and it’ll be interesting to see how much longer voters will be prepared to put up with this ineptness and lack of political courage to fix the problem.
