As Labor's housebuilding targets fall further out of reach, broking sector will become increasingly competitive
Two pieces of macroeconomic data released this Monday summed up Australia’s housing crisis in a perfectly formed nutshell.
Firstly, building approvals took a sharp hit in July, dipping 8.2% on a month-on-month basis to 15,769 dwellings.
This decline was primarily driven by a 22.3% drop in private multi-unit dwelling approvals, which served to unwind June’s strong upwards spike. High-rise builds (nine storeys or more) were particularly weak, plunging by more than half for the month.
Secondly, and completely unsurprisingly, national house values surged for the seventh straight month, with all signs pointing to more momentum ahead.
Cotality’s August report showed national dwelling values rose 0.7% in August, the fastest pace since May last year.
The double-hit of data presented a pretty obvious microcosm of the imbalance in Australia’s housing market – not enough homes are being built, causing prices to keep soaring to unsustainable levels.
As Cotality’s research director Tim Lawless said: “Once again we are seeing a clear mismatch between available supply and demonstrated demand placing upwards pressure on housing values.”
If more proof was needed of a demand-supply imbalance, one need only check out Chapman University’s headline-making Demographia International Housing Affordability report published in May.
Sydney received the dubious honour of winning silver as the second-least-affordable city in the English-speaking world, behind only Hong Kong. At 13.8-times multiple to average annual income, Sydney was slapped with the admittedly hyperbolic “impossibly unaffordable” label.
Melbourne, Brisbane and Adelaide were also labelled “impossibly unaffordable”.
None of these figures will come as a surprise for brokers who have seen first hand the difficulties first-home buyers face in entering the property market, but the data make clear the challenges that lay ahead for the Labor Government.
Housebuilding hopes continue to fade
Labor’s marquee housing policy is to have 1.2 million new homes built by 2029, but the current run rate on housing approvals remains short of the mark.
While the Housing Industry Association (HIA) increased its June 2029 residential construction projections last week from 986,000 to 1.01 million new homes, that leaves a shortfall of 119,000 new homes.
Discussing the matter with MPA, AMP Bank’s chief economist Shane Oliver (pictured) said: “Reaching (Labor’s) target is looking very hard unless we quickly pivot to building units and modular homes which use less resources and speed up the time taken to build homes.”
Oliver believes approvals will remain sluggish “because of the lagged impact of high interest rates on demand for new homes… because of high home building costs, it costs more to build a new one than buy an existing dwelling.”
To be fair, while July building approvals “were pretty bad”, Oliver took a wider view of the data. Month-on-month build rates are “normally very volatile… due to huge swings in unit approvals”, he said.
Annualised build rates are actually up sharply from 2024-24 lows, while Commonwealth Bank economist Harry Otley predicted “an improvement in building approval numbers through the remainder of 2025, driven by an interest rate cutting cycle, rising dwelling prices, increased capacity in the construction sector and government policy support”.
But none of this changes the fact that a lot more needs to be done.
“The bad news is that approvals are running well below the Housing Accord target to build 240,000 homes a year or 1.2 million over five years,” Oliver said. “Currently approvals are only running around an annual pace of around 194,000, which implies a huge and continuing shortfall.”
Oliver predicted that ever-increasing home prices, coupled with supply shortfalls, will limit transactional activity in the mortgage broking space. At 22,000-plus brokers on the beat, it will at very least make the broking market more competitive.
Government policies adding fuel to the fire
The federal government’s expanded First Home Guarantee – allowing buyers to enter the market with just a 5% deposit – is now being brought forward from January 2026 to this October.
When the scheme comes into effect next month, every first-home buyer in Australia, regardless of income, will be able to purchase a home with just a 5% deposit. The government will guarantee the remaining three quarters of an 80% LVR loan, avoiding the need for costly Lenders Mortgage Insurance.
Meanwhile, the Help to Buy scheme, offering a 30–40% shared equity option for up to 10,000 buyers a year, is expected to launch later this year.
While these measures will help buyers into the market sooner, they are also expected to push demand higher, putting more pressure on already stretched affordability.
