The Housing Industry Association expects new home construction to keep growing in 2027 and 2028, but says recent tax and investment changes will slow that growth and leave the country well short of its national housing target.
The forecasts are contained in HIA’s Economic and Industry Outlook report, which updates projections for new home building and renovations activity nationally and across all eight jurisdictions.
“Despite recent changes to housing taxation and investment settings, HIA expects the number of homes commencing construction to continue to rise in both 2027 and 2028, albeit, slower than would have occurred,” Tim Reardon, HIA’s Chief Economist, said.
Tim pointed to two Federal Budget measures as the key drags on supply: increased taxes on established housing, and a new prohibition on self-managed super funds borrowing to invest in residential property, which removes a source of new home finance.
He said these policies have interrupted an expansion in home building that was already underway, though they won’t necessarily cause commencements to fall nationally.
“The effect is that Australia will build fewer homes than it otherwise would have. We anticipate that over the Housing Accord period Australia will fall 186,000 homes short of the 1.2 million homes target,” he said.
Tim said population growth and household formation are continuing to outpace the supply of new homes, adding to an existing shortage.
He expects these structural forces to increasingly drive the housing cycle, with a return to positive home price growth from early 2027, but cautioned that a pickup in commencements shouldn’t be read as a sign the shortage is easing.
Rather, he said, it’s the shortage itself that will eventually create the conditions needed to support more construction.
Tim also pushed back on the idea that carve-outs for new housing, such as retaining negative gearing for newly constructed homes, can shield new supply from the effects of taxing established property.
“There is a fundamental difference between reducing the price of an established home and reducing the cost of delivering a new one,” he said, explaining that when established prices fall but the cost of land, labour, materials, infrastructure, finance and regulation doesn’t, fewer new projects stack up financially.
“The tax rules may distinguish between new and established homes. The housing market does not,” he said.
Tim flagged one risk to the forecast: if uncertainty created by the recent policy changes drags on longer than expected, due to economic or political factors, it could trigger a sharper decline in new home building than currently projected.
“Confidence is hard won and easily lost,” he said.