Australia’s home building industry is facing a major crunch — and the numbers don’t lie.

According to the Housing Industry Association (HIA), just 168,050 new homes began construction in 2024 — marking the lowest level in more than a decade. The data, released in the Australian Bureau of Statistics’ December 2024 Building Activity Report, reveals an industry under serious pressure.

Fewer Homes, Fewer Workers

HIA Chief Economist Tim Reardon summed it up bluntly.

“Home building is currently at the bottom of a cycle and is losing skilled workers to other industry sectors, which impedes future building capacity.”

As the pace of construction slows, tradespeople are exiting the sector — and that’s a problem. When demand picks back up, there may not be enough skilled workers left to meet it.

We’re Falling Behind Fast

Australia typically builds more than 200,000 homes annually, but to reach the Federal Government’s target of 1.2 million homes over five years, we need to be building at least 250,000 a year.

“HIA forecasts just 983,530 homes will be built over the next five years unless serious action is taken,” Reardon warned.

That leaves a significant shortfall that could have serious consequences for housing affordability and supply.

Low Unemployment, High Costs

Australia’s low unemployment rate is creating a challenging paradox for builders. While more people are in jobs and seeking homes, it’s driving up the cost of labour and materials.

“Low unemployment drives demand for housing, but it also drives up labour costs,” said Reardon.

Builders are being squeezed — caught between rising costs and shrinking margins.

Federal Election: Can Policy Shift the Needle?

With the federal election campaign underway, housing affordability and construction are hot topics. Reardon believes there are steps the incoming government can take right away to stimulate home building.

These include:

• Removing costs like Lenders Mortgage Insurance

• Providing financial support or incentives for first home buyers to build new homes

• Offsetting the costs of taxes, fees, and infrastructure charges

He calls these the “easy-good” options — quick wins that can make an immediate difference.

Long-Term Fixes Are Essential

Reardon stresses that short-term incentives are only part of the solution. Long-term, structural reform is essential to break the bottlenecks in housing supply.

This includes:

• Improving land supply and speeding up release processes

• Reducing infrastructure and compliance costs

• Streamlining planning systems

• Reforming outdated tax structures on new homes

Without these deeper changes, Australia risks entrenching the housing shortage and pricing more buyers out of the market.

The takeaway? The building slowdown is a red flag for the entire housing market. Without urgent policy changes and long-term reforms, Australia will fall well short of meeting the housing needs of a growing population.