Industry survey highlights tight margins, financing constraints and planning delays for new projects
Australia’s detached housing sector has started the year with small construction firms still wary about their financial outlook, despite persistent demand for new homes and ongoing policy focus on supply targets.
New survey findings from the Housing Industry Association (HIA) indicate that many smaller operators do not expect stronger profitability in the current financial year.
“HIA research shows that 59% of our small business members surveyed do not expect to increase profits this financial year compared to last,” said Simon Croft, chief executive – industry and policy at the Housing Industry Association.
“If businesses aren’t making reasonable returns, they lack the capital to take on new projects and reinvest in operations or staff to improve productivity – creating a cycle that’s hard to break.”
Builders face margin stress, financing constraints
According to the trade body, many of its members report that high insurance costs, labour shortages and persistent planning delays are limiting new work and investment decisions.
“Margins are expected to remain tight, with builders continuing to absorb higher labour, material and regulatory costs, while approval timeframes and financing constraints slow projects before they even start,” Croft (pictured right) said.
“Lifting confidence – and the viability of small businesses – in the building sector must be a priority if governments are serious about tackling Australia’s housing shortfall and meeting the target of 1.2 million homes.
“Governments can make an immediate difference by accelerating planning approvals, cutting unnecessary red tape and supporting workforce growth across the construction sector.
“If confidence remains weak, fewer homes will be built. Improving conditions for builders is one of the fastest ways governments can help unlock new housing in 2026 and beyond.”
Impact on housing targets
The housing supply targets agreed by governments are dependent on a functioning small builder base able to commit to and complete projects with reasonable certainty. Persistent weakness in business confidence among these firms may challenge efforts to expand the stock of new housing at the pace required to address current shortages.
Regulatory settings, planning performance and workforce capacity will remain critical factors in determining whether businesses can stabilise profitability and increase activity.
Any sustained improvement in these areas is likely to influence builder confidence, construction volumes and, ultimately, the flow of new stock into the mortgage market over the coming years.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
