Australia’s housing pipeline under pressure as new home shortfall looms
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Australia’s housing market is facing significant challenges as new research projects a substantial shortfall in housing supply by the end of the decade. Despite some early signs of recovery, the Urban Development Institute of Australia (UDIA) has revealed that the nation is on track for a deficit of 380,000 homes by 2030. This alarming forecast raises concerns about the country’s ability to meet the National Housing Accord target of 1.2 million new homes within the same timeframe.
The findings, detailed in UDIA’s annual State of the Land (SOTL) report, highlight the pressures facing Australia’s housing market. The report, which explores residential development activity across capital cities and various housing segments, predicts a national dwelling shortfall equivalent to about 76,000 homes annually, roughly the size of Greater Cairns.
The report underscores a decline in new dwelling production, with expectations of an 11% drop in 2026. Oscar Stanley, UDIA’s national president, attributes this decline to a combination of rising costs, labour shortages, and volatile apartment construction activity. “Elevated construction costs, labour constraints, infrastructure funding challenges and increasingly complex planning systems are placing significant pressure on development feasibility and limiting the pace at which new housing can be delivered,” Mr Stanley stated in the report. He further noted, “These structural challenges are particularly evident in the apartment and multi-unit sectors, where development activity remains well below historic norms.”
The report paints a mixed picture when broken down by housing type, with a noticeable divergence between detached housing and apartments. In 2025, approximately 78,400 detached houses were completed across capital city greenfield release areas and infill locations, marking a 1% decline from the previous year. However, detached housing sales showed a modest recovery in 2025, with greenfield lot sales rising 10% nationally to a total of 43,185 sales.
Greater Sydney led the rebound in detached housing sales, with a 29% increase over 2024, while Greater Melbourne saw a remarkable 50% lift. The Australian Capital Territory (ACT) experienced a sharp increase of 62%. In contrast, sales activity fell in South East Queensland (-7%), Greater Adelaide (-15%), and Greater Perth (-4%). Despite these improvements, overall capital city greenfield sales remained 11% below the decade average.
Supporting the notion of demand building beneath the surface, new research from Oliver Hume Property Group suggests that demand for new housing is continuing to grow, albeit unevenly across markets. Their newly released Land Index and Residential Outlook indicates that four out of five major land markets in Australia are operating above long-term trend levels. “The South East Queensland, Perth, and Adelaide markets have the majority of indicators performing historically strongly; Sydney has moved back above what is considered a normalised market, while Melbourne remains below normalised market activity levels,” said Matt Bell, Oliver Hume’s chief economist.
In the year leading up to the December 2025 quarter, sales volumes increased in Melbourne (24%), Sydney (183%), Adelaide (29%), and Perth (52%), while South East Queensland saw a slight decline of 1%. Despite Melbourne’s below-trend status, the report points to pent-up demand and improving established housing conditions as key supports for a recovery this year.
However, the outlook for apartments and multi-unit housing is less optimistic. Total multi-unit completions fell by 24% over the year to 34,600 homes, remaining 42% below the peak supply levels achieved in 2017. The SOTL report indicates that new apartment and multi-unit sales dropped 12% in 2025 to 18,700 transactions, which is 40% below the decade average. Recent building approval data further highlights the volatility in this segment, with multi-unit approvals accounting for much of the overall construction downturn in late 2025 and early 2026. Approvals fell 30.7% in December 2025 and 24.5% in January 2026.
In response to these challenges, the UDIA is advocating for government action to unlock the system and boost housing supply. “To restore housing supply at the scale required, governments must prioritise policies that enable development to proceed efficiently and feasibly,” Mr Stanley urged. He emphasized the need for measures such as boosting development-ready land supply, streamlining planning approvals, addressing infrastructure funding constraints, and ensuring planning systems support the timely delivery of new housing across all markets.
The UDIA SOTL report was compiled with the collaboration of research partners Researchfour, Cotality, and Charter Keck Cramer, providing a comprehensive analysis of the current state and future outlook of Australia’s housing market.