Housing supply bottleneck deepens as construction delays threaten rents, property prices

Australia is building fewer homes than it needs despite a record number of dwellings under construction, reinforcing concerns that chronic housing undersupply will continue to support rents and, over time, property prices.

The latest Australian Bureau of Statistics figures show 43,816 dwellings were completed in the March 2026 quarter, well below the 60,000 homes required each quarter to meet the Federal Government’s National Housing Accord target of 1.2 million new homes by 2029.

Across the first six quarters of the Accord, 262,592 homes have been completed, leaving Australia almost 100,000 homes behind schedule.

According to Clinton Arentz, Head of Lending at Trilogy Funds, the pace of construction now needs to accelerate significantly.

“We’ve reached an inflection point where even achieving 60,000 completions each quarter means we’ll still fall short of the overall target.

“To hit this target, we’ll need to average around 67,000 completions each quarter to 2029,” he said.

Compounding the problem, dwelling commencements fell 11.2 per cent in the March quarter to 48,012, suggesting the pipeline of future housing remains constrained.

Supply constraints continue to underpin the market

While some markets have softened after several years of rapid growth, industry observers argue the underlying supply-demand imbalance remains intact.

Julie Kelley, Head of Sales and Marketing at aussieproperty.com, said the current market should be viewed as a correction rather than the start of a prolonged downturn.

“The market is correcting, but talk of a nationwide property collapse is overblown,” she said.

“Australia’s underlying fundamentals, including population growth, housing undersupply and enduring demand for homeownership, have not disappeared.”

Ms Kelley said Sydney and Melbourne could present opportunities for buyers as values adjust, while Perth and Brisbane continued to benefit from strong population growth, limited housing supply and robust rental demand.

Simon Gold, Director of Taxation – NSW, Australasian Taxation Services, said lengthy development processes meant any increase in housing supply would take years to flow through.

“We would expect national property prices to recover and indeed surpass the previous highs; it may just take a few years to do so,” he said.

“The big ‘watch this space’ is what the future cost of construction will be, as well as how long it actually takes for new supply to come on board.”

Mr Gold said development timeframes, from site acquisition through to occupation certificates, created a significant lag that would continue to constrain new housing supply.

Meanwhile, governments are increasingly backing modular and prefabricated construction in an attempt to improve productivity and reduce build times.

While the sector has attracted renewed investment and policy support, industry participants say widespread adoption will depend on finance becoming more readily available and builders demonstrating that factory-built homes can consistently deliver lower costs.

The missing apartments today’s renters will feel tomorrow

While housing approvals continue to run above completion levels, analysts argue the bigger issue is that projects are taking longer to become homes.

Justin Yang, Principal, Vantor Research, said Australia currently has almost 244,000 dwellings under construction — the highest level on record — yet the country continues to fall further behind demand because projects are becoming increasingly difficult to complete.

“There have never been more homes under construction, yet Australia keeps falling further behind on the homes it actually needs,” he said.

For investors, the most significant signal lies within the composition of approvals rather than the headline numbers.

House approvals have strengthened, but apartment approvals have weakened sharply as higher construction costs, elevated interest rates and labour shortages undermine project feasibility.

“It is not because nobody wants apartments; record-tight rental markets say the opposite,” Mr Yang said.

“It is because at today’s build costs and interest rates, the sums on a new apartment tower simply do not stack up.”

The consequence is unlikely to be immediate, but it could become increasingly evident over the next two years as today’s weaker approval pipeline translates into fewer completed apartments.

“The apartments not approved today are the rents people will pay tomorrow,” Mr Yang said, warning Brisbane and inner-city markets could be among the first to experience renewed rental pressure.

Construction costs remain another major obstacle.

Master Builders WA said building material prices in Perth rose 3.9 per cent over the year to June, with electrical equipment, plumbing products and cement all recording significant increases.

Since before the Covid pandemic, the cost of materials used to build a house in Perth has surged more than 43 per cent, highlighting the ongoing pressure facing developers nationally.