Housing starts rise but remain below government targets
By
Photo by Scott Webb
The latest figures from the Australian Bureau of Statistics (ABS) reveal a modest increase in housing starts, yet the numbers still fall short of government targets. According to the Building Activity data for the September quarter of 2025, the number of new homes commencing construction has risen, but not to the levels needed to meet national housing goals.
HIA Senior Economist Maurice Tapang highlighted the impact of lower interest rates on the housing market, noting, “Lower interest rates have seen the volume of new homes commencing construction increase, but they still remain well below the government’s target.” This sentiment underscores the ongoing struggle to meet the ambitious objectives set by policymakers.
The ABS data shows that dwelling commencements in the 12 months to September 2025 increased by 11.2 per cent compared to the previous year, reaching a total of 184,460. While this growth is a positive development, it remains insufficient to meet the Australian Government’s target of 1.2 million homes over five years, which requires an annual construction rate of 240,000 new homes.
Mr Tapang elaborated on these figures, stating, “The volume of home commencements remains below the 240,000 new homes per annum needed to build to the Australian Government’s target of 1.2 million homes over five years. They also remain below the average volume commenced over the past decade.” This shortfall highlights the challenges facing the housing sector as it struggles to keep pace with demand.
Despite the increase in housing starts, Mr Tapang cautioned that the growth trajectory is expected to be steady rather than rapid. “These are positive signs that confirm our expectation that the number of homes commencing construction will see steady, not explosive, growth over the next couple of years,” he said. This tempered outlook reflects the complexities of the housing market, where various factors influence the pace of new developments.
One of the key areas poised for growth is apartment construction. Mr Tapang pointed out that this sector has significant potential to contribute to the overall housing supply. “This growth is expected to come from a resurgence in apartment construction. Apartment construction remains well below the volume commencing construction a decade ago and is one of the keys to increasing supply,” he explained. The resurgence of apartment projects could help bridge the gap between current construction rates and government targets.
However, Mr Tapang emphasised that increasing the supply of homes requires more than just favourable interest rates. “In order to increase the supply of homes, governments need to help lower the cost of delivering new homes to market,” he noted. Addressing the cost barriers to construction is crucial for achieving the desired expansion in housing supply.
Furthermore, Mr Tapang identified several other challenges that must be addressed to boost housing delivery. “Demand is not the challenge. Delivery is. Land supply, infrastructure timing, planning bottlenecks and workforce capacity will shape the 2026 experience more than interest rates,” he concluded. These factors, he argues, will play a more significant role in shaping the housing market than the current interest rate environment.
As the housing sector continues to navigate these challenges, stakeholders will be closely monitoring the interplay of these factors and their impact on the market. While the recent increase in housing starts is encouraging, the path to meeting government targets remains fraught with obstacles that require coordinated efforts from both the public and private sectors.