Australia's housing construction shortfall has grown to 125,000 homes, with new data showing total home starts fell 11.2% in the March quarter to 48,012 dwellings, according to OurTop10.com.au modelling from Primara Research, as reported by news.com.au.
High-density starts dropped sharply, down 19.8% to 19,116, while detached house starts fell 3.5% to 27,658. The country now needs to build 260,000 new homes a year to reach its 1.2 million target by 2029, after missing the first year's benchmark.
The modelling carries a striking implication for the broader market: Primara's head of research, Peter Drennan (pictured left), said average house prices, projected to peak at $1.15 million in September 2027, could fall to $927,000 by the end of 2031 if the government actually hits its supply target under current unemployment and interest rate settings — a real-terms drop of around $223,000, or roughly 19%, from the projected peak.
That trough would sit just below today's levels: Cotality puts the national median home value at north of $937,000 as of June 2026, with Sydney, Brisbane and Perth already in seven-figure territory.
Independent economist Saul Eslake (pictured center) told NewsWire the political incentives work against building enough homes to lower prices, given the electoral maths. He pointed to a stark imbalance: against roughly "one million votes for cheaper housing," Eslake said there are "11-12 million votes for more expensive housing, so even our dumbest of politicians can do this maths and they do."
Eslake argued falling prices wouldn't hurt existing owner-occupiers, since they buy and sell within the same market.
"The only losers when house prices fall are investors," he said, noting recent negative gearing and capital gains tax changes should reduce investor demand for established homes and improve access for first-home buyers.
Eslake's prediction of reduced investor demand already has a number attached to it: Sydney broker Alex Veljancevski has calculated the change could cut a $100,000-income investor's borrowing capacity from $750,000 to $600,000, a 20% reduction, once negative gearing is stripped from serviceability calculations for established properties bought after 12 May 2026.
Master Builders Australia director of policy Melissa Byrnes (pictured right) pointed to tax policy and workforce constraints as key hurdles.
"Changes to negative gearing and capital gains taxes are slowing activity and investment decisions at the moment," Byrnes told news.com.au, adding the sector needs roughly 115,000 more workers, alongside broader skills shortages affecting the wider infrastructure pipeline.
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