Reforms are needed to meet the government's housing targets, says economist
Australia is on track to miss its housing construction target by nearly 200,000 homes over the next five years, the Housing Industry Association (HIA) said.
According to HIA senior economist Tom Devitt (pictured), projections indicate that just over a million new homes will be built, falling short of the government’s aim.
The findings were published in HIA’s latest economic and industry outlook report, which provides updated forecasts for new home construction and renovation activities across the country.
Devitt noted the potential to reach the 1.2 million new homes mark within five years but stressed the necessity for substantial policy reforms.
“These reforms need to include lowering taxes on home building, easing pressures on construction costs, and decreasing land costs,” he said. “As it stands, both the detached housing and multi-units markets are set to be recovering in 2024-25 from recent decade lows.”
“A cut to the cash rate this year is increasingly uncertain as unemployment remains low and inflation increasingly sticky,” Devitt said. “The recovery in home building isn’t, however, reliant on a cut to the cash rate, but a more stable interest rate outlook. Pent up demand for housing will allow market confidence to grow and buyers to return to the market.
“This recovery will, nonetheless, be insufficient to meet government housing targets as long as home building continues to be constrained by punitive taxes and regulations.”
He said that excessive tax surcharges on foreign investors and recent amendments to building codes, which could increase construction costs significantly, are counterproductive to achieving these targets.
To enhance the industry’s capacity, Devitt called for improved access to skilled labour from abroad and increased efforts to train and upskill the local workforce. He argued that continued support for apprenticeships, including the maintenance of current subsidies, is critical.
“Reforms in these areas would represent a material upside risk to this housing outlook and could see Australia exceed the government’s target and potentially build sufficient homes to meet demand,” he said.
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