Australia’s housing supply crisis is set to worsen as developers struggle to remain profitable, according to Mark Greenberg (pictured), founder of non-bank lender Lambert Capital.
“The problem is that developers’ profit margins are extremely tight right now, because building costs and land acquisition costs have increased significantly since the pandemic,” Greenberg said. “To make matters worse, developers’ projects have been taking longer to get approved, built and titled, which has led to an increase in their holding costs and a further reduction in their profits.
“These conditions are close to the toughest I’ve seen during the 25 or so years I’ve been lending, and they’re driving a lot of mum-and-dad developers out of the game,” Greenberg said. “It’s now close to impossible to be, say, a dentist during the week and a property developer on the weekend, because you won’t have the scale or experience to build fast enough and cheap enough.”
The federal government’s National Housing Accord aims to deliver 1.2 million new homes over five years to June 2029, but recent industry data shows Australia is falling well short of the annual pace needed to reach this target.
Cotality head of research Eliza Owen warns the real bottleneck is in the build phase, not planning, with over 219,000 dwellings under construction and another 30,000 approved but not yet started. Completion times are lengthening, and costs remain high, while the National Housing Supply and Affordability Council projects a shortfall of 262,000 homes by 2029.
“In the current environment, it’s almost a case of no scale, no profit,” Greenberg said.
Developers are responding by starting their own building businesses, buying into established companies, or partnering with trusted project managers and builders.
“I’m also seeing some developers buying up different parts of the supply chain, like tiling or plastering businesses, to maximise control and efficiencies,” Greenberg said.
Greenberg believes the federal government’s goal of 1.2 million new homes by June 2029 is unrealistic.
“It’s pie-in-the-sky stuff,” he said. “There just aren’t enough developers and builders, because it’s become too hard to run a profitable business these days. So where are all these new homes meant to come from?”
While the Reserve Bank has cut the official cash rate three times since late 2024, bringing it to 3.6%, developers say lower borrowing costs have not offset the impact of high build costs, approval delays, and regulatory hurdles.
“If we’re ever going to fix this problem, we need to see all levels of government – federal, state, local – find a way to streamline the planning and building approval process,” Greenberg said. “They also need to get out of the way and stop making it so onerous for developers to get final sign-offs on projects.
“The number of hurdles you need to jump over to reach the starting line is ridiculous, and delays with authorities at the end are leading to a blowout in holding costs. Otherwise, we’re never going to see housing supply catch up with demand, and housing affordability will keep deteriorating.”
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