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Regional Economic Development

HIA says home building to lift in 2026 – but interest rates determine how far and how fast

AUSTRALIA’s home building industry is expected to strengthen through 2026, supported by gradually improving building approval levels and a recovery in demand, but the pace of growth will depend on how quickly interest rates can fall, according to the Housing Industry Association (HIA).

HIA senior economist Tom Devitt said new data on building approvals and inflation, released today, provides an important signal for the housing market as it enters 2026.

“Building approvals are the clearest leading indicator of future home building, and they have been gradually rising over the past year as the cash rate fell,” Mr Devitt said. 

“Building approvals data shows activity has been strengthening over the last couple of years, including a 10.1% increase in house approvals in the last three months compared to the same quarter two years earlier, and a 36.4% increase in multi-unit approvals over the same period. 

“We expect approvals to continue trending upward, which should translate into higher levels of home building activity through 2026, particularly once the impact of earlier rate cuts flows through to construction starts.

“It is anticipated that a recovery will continue in both detached housing and multi-unit construction from 2026 onward, following several years of subdued activity, especially in the apartment sector,” Mr Devitt said.

“After nearly a decade of underbuilding, the foundations are finally being laid for a broader housing recovery in 2026.

“Strong population growth, rising established home prices and an improving approvals pipeline are all pointing toward higher levels of home building over the next few years.

“While the price of land and taxes on housing are the key determinants of the number of homes to be built this year, inflation also remains a risk to a faster recovery in home building,” he said.

“The trimmed mean consumer price index for November came in at an annual rate of 3.2%, indicating that further rate cuts will be delayed.

“A few recent surprises to electricity and rental prices lifted the annual rate of inflation above the RBA’s 2-3% target.

“Property rates have also been accelerating, with each of the last five annual increases larger than the last, increasing by a further 6.2% in 2025.

“There have also been recent pressures in other items like water and sewerage utilities and government excise taxes,” Mr Devitt said.

“Price pressures have eased from their peak and many of the recent upward surprises are driven by temporary factors, like the timing of electricity rebates or domestic holiday activities.

“Nonetheless, CPI inflation is likely to remain elevated in the near term and the RBA is on the lookout for any signs of underlying inflation being reignited.

“The rate cuts delivered in 2025 provided an important tailwind for housing demand and approvals. But without further easing in borrowing costs, the recovery in home building will be more gradual than Australia needs, given the scale of the housing shortfall.”

According to HIA estimates, Australia remains short of its housing needs by close to two million homes, with population growth continuing to outpace new supply.

“This is the central challenge facing the housing market in 2026,” Mr Devitt said.

“A constrained supply of new homes is adding to upward pressure on rents, prices and inflation itself, which in turn feeds back into higher interest rates.”

“It is particularly counterproductive that the shortage of housing supply is putting pressure on inflation and interest rates, further impeding new home building.”

HIA’s outlook shows detached home building strengthening across most states in 2026, led by Queensland, South Australia and Western Australia, with New South Wales and Victoria beginning to recover after lagging earlier in the cycle.

The multi-unit sector is also expected to turn a corner from 2026, as higher established unit prices improve project feasibility and a large pipeline of approved but not commenced projects begins to move. 

“The next housing upswing is taking shape, but it will not reach its full potential unless policy settings support it,” Mr Devitt said.

“Lowering the cost of delivering new homes through planning reform, improved land supply and lower government charges will be critical if Australia is to lift housing supply without reigniting inflation,” he said.

In seasonally adjusted terms, the volume of new home approvals in the three months to November compared with the same quarter two years earlier increased the most in Western Australia, up by 71.3%.

This was followed by Queensland (+33.6%), South Australia (+29.2%), New South Wales (+24.6%), Victoria (+3.7%) and Tasmania (+0.5%). In original terms, the Northern Territory increased by 68.1% while the Australian Capital Territory declined by 47.5%.

www.hia.com.au

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HIA says policy changes seeing a spike in home building

THE Housing Industry Association (HIA) is observing a spike in new home building that seems to be a result of recent policy changes in several areas both financial and governmental.

“Sales of new homes for construction jumped 25.9% in September following a series of policy changes, including a cut to the cash rate in August, removal of Lenders Mortgage Insurance and easing in planning restrictions,” HIA chief economist, Tim Reardon said.

The HIA New Home Sales report is a monthly survey of the largest volume home builders in the five largest states and is a leading indicator of future detached home construction.

“The volume of new homes sold nationally increased by 25.9% in the month of September 2025. This is the largest monthly increase since the final phase of the HomeBuilder grant in March 2021,” Mr Reardon said.

“This sees sales in the September quarter a more modest 4% higher, to reach its highest quarterly volumes since October 2022.

“Sales of new homes in September were notably stronger in New South Wales and Victoria where sales have previously struggled to recover despite the cut to the cash rate. These markets have been very slow to respond to the cuts to the cash rate. 

“The rise in sales in New South Wales and Victoria could be a sign that new home building is returning to more average levels, but further data will be necessary to support this view,” Mr Reardon said.

“The cut to the cash rate is the primary driver of the rise in sales of new home this year. Other factors include low unemployment, strong population growth and rising established home prices.

“The rise in established home prices is seeing more households choosing to build a new home, because it is cheaper than an established home.

“The removal of the requirement for LMI for first home buyers has seen builders across the country report increased first home buyer activity.” He said.

“Lowering the cost of borrowing is expected to see an increase in new home building, and therefore have a positive impact on the supply of homes. Because this policy change doesn’t impact the amount a first home buyer can borrow, it doesn’t add to their risk of default.

“Around a third of all new homes are built by first home buyers and they play an important role in increasing housing supply.

“The announcement is likely to have seen more confidence in the market outlook for all households, not just first home buyers.

“Additional policy reforms including accelerated approvals processes in New South Wales through complying development pathways (CDCs) and lower infrastructure costs appear to be having a positive impact on supply.

“Further reforms to fast-track approvals as well as accelerated Environment Protection and Biodiversity Conservation (EPBC) decisions and further planning reforms could further increase supply.

“Australia will likely fall well short of the goal of 1.2 million new homes, but policy levers are starting to move in the right direction in many states,” Mr Reardon said.

This month’s increase in new home sales nationally was driven by all states, led by a 34.8% increase in Victoria.

New South Wales trailed closely behind with a 34.4% monthly increase, followed by Queensland (+25%), Western Australia (+14.2%) and South Australia (+7.5%).

www.hia.com.au

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New home sales remain around three-year high - HIA

NEW HOME sales in Australia are still peaking at their three-year highs.

“The volume of new homes sold (contract-to-build) nationally decreased by 1.2% in the month of August 2025,” HIA senior economist, Tom Devitt said.

The Housing Industry Association (HIA) New Home Sales report is a monthly survey of the largest volume home builders in the five largest states and is a leading indicator of future detached home construction.

“New home sales in the three months to August 2025 were 5.1% higher compared to the previous quarter,” Mr Devitt said.

“Despite the slight monthly moderation, sales in the three months to August 2025 remain higher than any previous quarter in the last three years. 

“This indicates that cuts to the cash rate are leading to a return in home buying activity, albeit very slowly.

“Demand for housing continues to increase due to elevated population growth and sustained low levels of unemployment.

“These factors have contributed to an increase in home buying activity, leading to an increase in the price of established homes,” Mr Devitt said.

“Ongoing competition for a limited stock of established homes available for purchase has seen buyers moving into new home building as an alternative.

“The supply side stimulus resulting from the Australian Government’s decision to remove the requirement for mandatory Lenders’ Mortgage Insurance (LMI) for first home buyers, will also boost new home sales.

“Around a third of all new homes are built by first home buyers and they play an important role in increasing housing supply.

“Reducing the barriers to entry for first home buyers will lead to an increase in housing supply, putting downward pressure on prices beyond the short term and increasing rates of homeownership,” Mr Devitt said.

This month’s decrease in new home sales nationally was driven by declines across all states except Victoria, where sales increased by 7.1%. The monthly declines were led by Western Australia, with sales decreasing by 7.7%, followed by Queensland (-6.7%), South Australia (-6.0%) and New South Wales (-1.2%).

www.hia.com.au

Detached house approvals up by 0.6% in July: HIA

THE Housing Industry Association has seen detached house approvals rise in July.

“The volume of detached houses approved for construction nationally increased by 0.6 percent in the month of July 2025 ahead of the 5% deposit guarantee announced last week,” HIA senior economist Maurice Tapang said.

The Australian Bureau of Statistics (ABS) yesterday released its monthly building approvals data for July 2025 for detached houses and multi-units covering all states and territories.

“Strong population growth, tight labour markets and recovering household incomes helped improve confidence in an increasing number of markets over the last 18 months,” Mr Tapang said. 

“This cyclical improvement in new home commencements will be enhanced by supply side initiatives, such as the 5% deposit scheme announced last week. Around a third of all new homes are built by first home buyers, and in the long-term, initiatives that reduce the cost of first home buyers entering the market will lead to an increase in new home commencements.

“This month’s increase in detached house approvals was broad-based across most states and territories, except Queensland and South Australia.

“This month’s increase brought the total volume of detached house approvals in Australia over the past 12 months up by 5.3% to 112,760.

“With three interest rate cuts having been delivered this year, more households are expected to return to the market to purchase a home.

“Strong demand for housing in the established market is expected to continue filtering through to the new home market, as building a new home becomes relatively more appealing,” he said.

“Multi-unit approvals decreased by 18.8% in the month of July 2025. Approvals for this segment remains volatile and at very low levels.

“The correlation between an apartment approval and commencement remains weak, as challenges with access to overseas financing, development costs, labour shortages and planning remain,” Mr Tapang said.

“In order to build sufficient housing to meet existing and growing demand, apartment construction needs to double from current levels.

“There remain upside risks to home building activity in Australia if policymakers help lower the cost of delivering new homes to market,” Mr Tapang said.

The volume of detached house approvals in the month of July 2025 in seasonally adjusted terms increased in Western Australia by 3.6%, followed by New South Wales (+3.2%) and Victoria (+1.7%). South Australia recorded a 4.6% monthly decline in detached house approvals, while Queensland fell by 3.7%. In original terms, Tasmania recorded a 48.4% increase in detached approvals, followed by the Northern Territory (+16.2%) and the Australian Capital Territory (+3.3%).

www.hia.com.au

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HIA says investors remain vital to increasing housing supply

“INVESTORS were responsible for 41 percent of new homes financed for construction in the past year,” Housing Industry Association’s (HIA) chief economist, Tim Reardon said this week.

The Australian Bureau of Statistics (ABS) released the Lending Indicators data for the June quarter 2025 this week, which provides the latest statistics on housing finance commitments.

“Investors are vital to the goal of increasing housing stock,” Mr Reardon said. 

“Since the 2019 election, the ABS has been reporting on the importance of investors to increasing the supply of new homes in Australia.

“Today’s data shows that in the 2024/25 financial year that the number of loans to owner occupiers for new homes declined by 1.4 percent, while the number of loans to investors increased by 3.5 percent. 

“Investors typically supply around a third of all new homes built in Australia but are a larger share of the market at present due to a lower level of activity from owner occupiers,” Mr Reardon said.

“Investors are not as adversely impacted by a rise in the cash rate, as they are not as sensitive to change in economic conditions or interest rates.

“Investors also accessed around a third of all loans for the purchase of an established home over the past six years. This is consistent with the ownership of the housing stock, which sees around a third of all homes available for rent,” he said.

“It is typical to see investors return to the market ahead of owner occupiers as they are less risk averse. We are in the middle of that cycle at present.

“Investors have been returning to the market, increasingly confident that ongoing strong population growth, tight labour markets and recovering household incomes will see the supply of homes outpaced by demand. 

“HIA’s New Home Sales Report is already revealing an increasing number of contracts for new home builds being signed by aspiring homeowners,” Mr Reardon said.

“It will be crucial for policymakers to maintain a strong pipeline of shovel-ready land – both greenfield and infill – to meet this return of housing demand and prevent housing affordability from worsening.

“Increasing taxes on investors, even when targeted at the established market, does not lead to an increase in home supply.

“This includes policies that reduce the tax imposts on those that build new homes and reduce the regulatory burden on the industry,” Mr Reardon said.

According to the HIA report, the Territories have been leading the return of investor activity in 2024/25, with loans for the construction or purchase of new homes up by 138.3 percent in the Northern Territory and 108.6 percent in the Australian Capital Territory compared with the previous year.

This was followed by gains in South Australia (+19.2%), Western Australia (+10.9%), Queensland (+7.4%) and New South Wales (+1.7%). Victoria (-0.9%) and Tasmania (-28.5%) saw the only declines in investor loans for new homes in 2024/25.

www.hia.com.au

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HIA economist says building approvals were up for 2024-25

“NEW home building approvals in the 2024/25 financial year were up by 13.9 percent compared with their 2023/24 trough,” Housing Industry Association (HIA) senior economist Tom Devitt outlined as part of his recent market assessment.

The Australian Bureau of Statistics has just released its monthly building approvals data for June 2025 for detached houses and multi-units covering all states and territories.

“Detached house approvals increased by 6.1% in the financial year, while multi-unit approvals were up by 27.9%,” Mr Devitt said.

“Strong population growth, tight labour markets and recovering household incomes helped improve confidence in an increasing number of markets over the last 18 months, led by Western Australia, Queensland and South Australia.

“Interest rate cuts from the Reserve Bank in February and May this year, with the expectation of more to come, will help bring more potential homebuyers back to the market in the lagging – and often more expensive – states and territories.

“The challenge will be turning this modest improvement in conditions into the kind of recovery that will meet the Australian Government target of 1.2 million homes over five years," Mr Devitt said. 

“In the 2024/25 financial year, the first year of the government’s five year target, Australia approved just 187,330 new homes. Given that some approved projects don’t ever commence construction, the goal of commencing 240,000 homes per year remains a distant goal.

“Even with lower interest rates, Australia is set to start just 200,000 homes per year, on average, over the next four years.

“Multi-unit activity, in particular, needs to do more heavy lifting. Multi-unit commencements need to double from current levels in order to achieve the government’s housing targets.

“This is unlikely to occur under current policies. Labour and land shortages, obstructionist regulations and punitive surcharges on institutional investors have pushed improving sentiment away from apartments back into the detached housing sector.

“Sustained improvement in multi-units activity will need to come from a reduction in policy burdens on the sector, or a re-acceleration of home prices until new projects are viable against higher policy costs, the latter not boding well for affordability,” Mr Devitt said.

Total new dwelling approvals in the 2024/25 financial year, in seasonally adjusted terms, increased in Western Australia by 32.3% and South Australia by 28.7%, followed by New South Wales (+16%), Queensland (+13.1%) and Victoria (+9.1%).

Tasmania declined by 9.9% In original terms, the Northern Territory increased by 22.5% while the Australian Capital Territory declined by 39.9%.

www.hia.com.au

 

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CAs say bold productivity reforms needed: start with tax overhaul

CHARTERED Accountants ANZ (CA ANZ) is adamant that bold tax reform is needed to boost Australia’s productivity.

CA ANZ is part of the coalition of 27 groups representing small, medium and large businesses, universities and the investment community, led by the Business Council of Australia, which delivered a joint submission to the Economic Reform Roundtable.

said the Joint Group of Industry Associations has outlined four priority areas to boost Australia’s economy ranging from the practical to the ambitious.

In addition to its input into the BCA-led submission, CA ANZ also made a separate submission to Treasury on the Economic Reform Roundtable on behalf of its more than 140,000 members, which outlines about 40 recommended actions including mandating digital reporting.

“Australia’s tax architecture is overdue for renovation,” Ms van Onselen said. “Let’s build a system that encourages rather than hinders investment into Australia, rewards innovation and supports sustainable growth.

“We need a tax system that powers productivity, not one that penalises progress – be it individuals or business. Reform must be bold, broad and built for the digital economy,” Ms van Onselen said.

“That said, there are immediate actions the Federal Government can do to get things moving on the productivity and economic front – and CA ANZ strongly believes that this should be mandating digital reporting.

“Digital reporting is the low-hanging fruit of productivity and economic reform. Ninety percent of the world’s major economies already do it, streamlining compliance and unlocking real-time insights that drive smarter decisions. So, it’s time for Australia to catch up,” Ms van Onselen said.

CA ANZ’s full submission to the Economic Reform Roundtable can be downloaded here: 20250725_Economic Reform Submission_CA ANZ.pdf

www.charteredaccountantsanz.com

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