Housing supply struggles to keep pace with demand, with most capital cities facing further declines
Australia’s housing crisis is set to deepen, with a new report forecasting a significant shortfall in new homes across the nation’s capital cities over the next five years.
The State of the Land Report 2025, released by the Urban Development Institute of Australia (UDIA), predicts that the federal government’s target of delivering 1.2 million new homes by 2029 will fall short by 393,000 dwellings.
According to the report, 135,640 new homes were completed across Australia’s capital cities in 2024 — a 2.4% increase from 2023. The growth was primarily driven by a 5% rise in detached housing construction, particularly in greenfield areas and established urban locations.
Among major markets, Greater Perth recorded the strongest growth, with new dwelling completions rising 22% in 2024. Greater Melbourne saw a 7% increase, while South East Queensland edged up by 1%.
In contrast, Greater Sydney experienced a 4% decline, Greater Adelaide dropped 6%, and the Australian Capital Territory saw the steepest fall at 16%.
UDIA’s projections indicate that most capital city markets, except Perth, will see further declines in housing supply over the next two years.
“There will be an 11% drop in aggregate volumes of combined capital city new residential market supply delivered in 2025 to 120,660 aggregate completions, with multi-unit sector production weakness holding back improvements in greenfield sector delivery,” the report stated.
UDIA further predicts 116,700 new homes will be completed in 2026 before a slight recovery in later years, with 125,000 homes expected by 2029.
Figures from the Australian Bureau of Statistics show that building approvals in 2024 totalled just 171,394 – almost 30% below the 240,000 approvals required annually to meet the government’s goal of constructing 1.2 million homes by 2029.
The UDIA report highlighted that Australia’s housing supply has failed to keep pace with population growth, with a severe shortfall between 2007 and 2014 playing a key role in today’s affordability crisis and rental shortages.
UDIA national president Col Dutton (pictured above) said that while population growth had slowed since last year’s report, net migration levels remained historically high.
“This increased demand profile has coincided with a decline in aggregate housing production across most capital city markets, which is pushing dwelling prices northwards and placing enormous pressure on rental markets,” he said.
Dutton emphasised that underbuilding over the past two decades has contributed to rising home prices, lower homeownership rates, and increasing household debt.
“This is the reason government needs to focus on boosting development-ready land supply if it is to have any hope of achieving its ambition to permanently ease housing affordability and improve the delivery of at-market, affordable and social housing,” he said.
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