The Australian housing market faces a significant challenge: hitting the ambitious goal set by the National Housing Accord to build 1.2 million new homes by 2028. Unfortunately, recent forecasts by the Housing Industry Association (HIA) reveal that Australia is expected to fall short of this target, with just under one million new homes projected to be completed by 2028.

Missing the Mark: What the HIA Forecasts Show

The HIA’s latest data estimates that only 975,970 new homes will be built over the next five years, leaving the country well below its annual target of 240,000 homes. By 2028, the annual construction rate is predicted to reach just 218,730 new houses, townhouses, and apartments — approximately 20,000 short of the mark.

In 2024 alone, only 165,510 homes are expected to be built, with that figure barely surpassing 200,000 in 2025 and 2026. This shortfall is projected to impact every part of Australia, with New South Wales likely to underperform the most. According to HIA Senior Economist Matthew King, the national shortfall is largely due to a lack of skilled labor, with critical infrastructure projects such as railways and highways drawing skilled tradespeople away from the residential construction sector.

The Trade Shortage Dilemma

For Australia to achieve its housing goals, the HIA has estimated that 83,000 additional tradespeople are needed. However, competing demand from other major infrastructure projects is stretching the labor market thin. Mr. King highlighted that without a more robust pipeline of workers, the construction industry will struggle to meet its targets, putting sustained pressure on housing affordability.

The Real Estate Buyers Agent’s Association of Australia (REBAA) also echoes concerns about the supply-demand imbalance, which could lead to rising property prices. As REBAA President Melinda Jennison explains, the shortage of new homes may increase house prices, potentially pushing more Australians into shared housing or multigenerational living arrangements as they try to manage rising costs.

Regional Differences in Housing Demand

Although the outlook for new home construction is challenging nationwide, some regions are showing stronger growth than others. Victoria, for example, has seen an uptick in housing starts, with one in three new homes approved nationwide located in this state. Meanwhile, areas like Perth, Adelaide, and South East Queensland are performing relatively well, although none are expected to fully meet the National Housing Accord targets.

In contrast, New South Wales is currently experiencing lower homebuyer activity, with approvals in Sydney predicted to decline. NSW remains a key area in need of growth, but its progress is likely to lag unless additional measures are taken to stimulate construction activity.

What the Future Holds

Looking ahead, while Australia is expected to see annual new home starts increase gradually, hitting the target of 1.2 million homes seems unlikely. The number of unit constructions is expected to grow steadily over the next five years, but detached houses may see a decline in the late 2020s.

The HIA’s forecast for annual new home commencements is as follows:

• 2024: 165,510 homes
• 2025: 176,890 homes
• 2026: 198,290 homes
• 2027: 216,550 homes
• 2028: 218,730 homes

Policy Implications and Market Adjustments

To address this shortfall, policymakers may need to consider innovative solutions to boost the workforce and rethink housing and investment policies. As the HIA’s Matthew King points out, without intervention, it is unlikely that Australia will hit its targets, and housing affordability will remain a pressing issue.

For prospective buyers and investors, this shortfall means that property prices may see upward pressure, especially in high-demand areas, as the supply of new homes struggles to keep up with demand. Additionally, as construction costs stabilize, we may see an increase in buyer confidence, although this effect may vary significantly by region.

For South Australians and potential investors in Adelaide, this forecast is a reminder of the importance of timing and strategic location choices in real estate investment. As regions outside of major cities, like Adelaide, show resilience in their housing starts, local opportunities may arise for those looking to enter the market before prices potentially escalate further.