Housing target still out of reach
Australia is expected to remain well behind its target to build 1.2 million new homes in five years, with fresh building activity data due this week.
The Australian Bureau of Statistics will release construction figures on Wednesday in an otherwise quiet week for economic data.
Construction started on more than 53,000 homes in the December quarter, up 8% on the previous quarter and 26% over the year.
Tom Devitt, senior economist at the Housing Industry Association, said dwelling commencements were likely to keep rising in the March quarter.
Dwelling completions are also expected to improve, but not by enough to meet the national housing accord target.
About 173,000 homes were completed in 2025, compared with the 240,000 homes a year needed to meet the target.
“Our forecasts have them well under,” Devitt told AAP.
“HIA has just released its own report estimating how many homes we need on a sustained basis, not just to meet population growth, but to also meet shrinking household sizes ... and to actually start making a dent in the pre-existing shortage.
“And the number we came up with was 250,000 homes per year.”
Construction pressures ease
A spokesperson for Housing Minister Clare O'Neil said construction times had improved, with new homes being built 10% faster than when the accord started in July 2024.
“Fixing a problem generations in the making takes time but we're seeing good progress in housing supply across the country with more homes being approved, more homes being built, and, importantly, they're being delivered faster,” they said.
Wednesday’s data will cover one month of the Middle East conflict, which sent fuel prices higher after the Strait of Hormuz closed to oil tankers.
Economists had warned construction costs could rise by up to 10%, but Devitt said those fears had not played out.
“Anecdotally ... it's more like 1%; a few thousand dollars added by fuel costs and other isolated supply constraints as a result of the Iran war, which isn't nothing but it's relatively limited,” he said.
Devitt said even if the sector slowed because of rate rises, curbs to negative gearing and changes to the capital gains tax discount, the fundamentals for housing remained strong.
“Once this uncertainty clears, the limitations on activity will really be things like interest rates and the extent to which policymakers can bring land and infrastructure to market, so that housing can actually commence,” he said.
RBA speech in focus
More clues on the path for interest rates could come on Wednesday, when RBA chief economist Sarah Hunter speaks at the Australian Conference of Economists in Canberra.
The speech comes as property market sentiment faces pressure from three rate hikes, affordability constraints and changes to investor tax breaks.
Markets ended higher
Wall Street investors are looking to next week after US indices closed for the Independence Day break on Friday.
Semiconductor stocks and other AI-linked companies fell on Wednesday and Thursday, while financials and healthcare shares were among the sectors favoured.
Australian share futures rose 35 points, or 0.39%, to 3,890.
The benchmark S&P/ASX 200 rose 119.9 points, or 1.37%, to 8,844.4 on Friday, while the broader All Ordinaries gained 117.4 points, or 1.31%, to 9,048.3.
