The outlook for new home building in Australia has improved amid stronger than expected population growth and new government policies that will deliver additional housing supply, the latest forecast indicates.

And a recovery in activity will be led by the detached house sector over the next two years before a strong upswing in multi-unit commencements takes hold toward the end of the decade.

In the latest quarterly edition of its Economic Outlook Report, the Housing Industry Association said that it has added 15,000 homes to its forecasts of new dwelling commencements over the five years to June 2029.

This takes the number of commencements that are expected to occur over this period from a previous forecast of 986,000 to a current forecast of 1.01 million.

At this level, the nation is still expected to fall short of the National Housing Target of 1.2 million new homes over the period.

According to the report, the upgrade has been driven by higher-than-expected population growth along with changes to government policy.

In terms of the former issue, current indications suggest that the nation’s population will rise above 30 million before the end of 2030.

This will create a greater level of demand for new housing than was previously expected.

In terms of policy, HIA points to recent changes both nationally and in New South Wales.

Nationally, the Australian Government recently announced that eligibility for its Home Guarantee Scheme will be expanded to cover all first home buyers.

Subject to price limits, the scheme enables first-homebuyers to purchase a property with a deposit of as little as five percent without needing to pay Lenders Mortgage Insurance (LMI).

Whilst some economists fear that this will drive-up demand and lead to higher real-estate values, HIA says that the policy will drive an increase in the number of first-home-buyers who build new homes.

This could add up to 10,000 in new home commencements over the aforementioned forecast period.

Turning to New South Wales, the report said that several reforms will add further momentum to new home delivery in that state.

These include a $1 billion plan to underwrite the pre-sale of up to 5,000 off-the-plan apartments along with the release of a ‘pattern book’ of designs to enable low and mid-rise apartments to receive faster planning approval.

 

Detached homes take the lead

The latest forecast comes as Australia is experiencing a recovery in home building activity which began in early 2024.

Thus far, the recovery has been focused on Western Australia, Queensland and South Australia.

It is primarily evident in detached housing – although approvals for multi-unit residential building (units, townhouses, apartments etc.) have trended higher over the past twelve months.

The recovery has been driven by the turning of the interest rate cycle, ongoing population growth and an underlying shortage of housing.

In its forecast, HIA said that detached housing will continue to be the focus of recovery for the next two years.

All up, it expects detached house commencements of 115,070 in calendar 2025 – a 7.2 percent increase from 2024.

Going forward, HIA expects detached home commencements to grow strongly over the next two years before peaking at 125,840 in 2027.

After that, starts will ease back as land constraints become more binding and new multi-units become relatively more affordable.

In the multi-unit sector, HIA expects the number of commencements to remain at subdued levels of 72,070 ad 76,570 in calendar 2025 and 2026.

Beyond that, a stronger recovery will see commencements accelerate toward healthier levels of 96,910 and 99,960 in 2028 and 2029 respectively.

This upswing will occur as rising prices for established homes deliver an improved feasibility outlook for new housing.

 

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