Australia’s market for new home building continues to improve, with the latest data showing that housing starts remain on an upward trajectory despite dropping back in the June quarter.

But the rate of building remains well below that which is required to achieve the national housing target.

The Australian Bureau of Statistics has released the June quarter edition of its Building Activity report.

On a seasonally adjusted basis, the report indicates that the number of dwellings on which construction commenced fell by 4.4 percent during the June quarter from 47,358 to 45,156.

Leading the decline was the detached house sector, which saw a 6.6 percent drop in commencements in the June quarter to 26,074.

This was not unexpected as a brief softer patch in detached building approvals was observed over 2024/25 summer.

Multi-residential commencement numbers edged up by 1.0 percent (but remain at subdued levels) following a sharp increase in the March quarter.

Gathering strength

Despite the latest quarterly decline, the new home building market remains on an upward trend.

Since bottoming out in September 2023, commencement numbers have risen during five of the past seven quarters.

On a financial year basis, dwelling commencements increased from twelve-year lows of 159,951 in 2023/24 to 179,029 in 2024/25.

Thus far, most of the recovery has been driven by detached housing. However, multi-residential starts began to pick up in the March and June quarters following an upturn in approvals during the second half of last year.

Going forward, forecasters are optimistic.

In August, Housing Industry Association (HIA) forecasted further steady improvement in detached house building over the next three years along with a stronger recovery in multi-unit commencements toward the end of the decade.

With approval numbers having trended higher throughout most of the year, commencements are likely to rise over coming quarters.

Missing targets

Despite this, the rate of home building remains well below that which is needed in order to reach the national housing target of delivering 1.2 million new homes over the five years from 1 July 2024 as set under the National Housing Accord.

To achieve this target, the nation would need to build 240,000 homes per year.

However, only 174,271 new homes were completed during the Accord’s first year of 2024/25 (down from 177,783 in 2023/24).

Partly as a result, forecasting firms and industry groups such as HIA, Master Builders Australia, Oxford Economics Australia and Australian Construction Industry Forum generally expect the nation to deliver around 950,000 to 1 million homes over the Accord period.

This would represent a shortfall of 200,000 to 250,000 compared with Accord targets.

Action needed

Industry bodies have welcomed recent government housing announcements.

These include fast tracking of Commonwealth environmental reforms to unblock new housing, the Commonwealth Government’s 5 percent deposit scheme and state level initiatives such as NSW Government plans to underwrite apartment sales and to ease planning restrictions.

However, there are calls for more to be done.

“Despite these initiatives, home building remains too expensive with onerous taxes, fees and charges incurred in delivering new homes to market,” HIA Chief Economist Tim Reardon said.

“Policymakers must reduce the taxes, costs and restrictions on home builders, home buyers and home investors if they want to see the kind of construction volumes Australia needs. Skills shortages and infrastructure bottlenecks must also be addressed.

“All forms of housing need to be supported, including greenfield house and land packages, middle ring medium density units and townhouses, and inner city and activity centre high rise apartments.”

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