Australia is on track to fall 262,000 homes short of the National Housing Accord's 1.2 million target, Master Builders Australia warned, as early indicators point to a softer construction pipeline despite a lift in June quarter activity.
"That's 262,000 less homes for Australian families, first home buyers and renters," said Master Builders Australia CEO Denita Wawn.
"It's pretty obvious now that they won't meet the target," Commonwealth Bank economist Harry Ottley told Australian Broker last week.
Building approvals, which typically lead construction activity, fell 6.1% in August. The group's forecasts, released the week before the ABS figures, cut expected activity across housing, civil construction, and non-residential building over the next five years compared with its March projections.
The building downturn is coinciding with weaker prices. Capital city dwelling prices fell 1.2% in September, according to Cotality, taking the three-month decline to 4% – the steepest three-month drop in records dating back to 1980.
The weaker outlook follows a stronger June quarter. New home building starts rose 7%, according to ABS building activity data, which Wawn said showed there was still activity in the pipeline during the quarter.
Detached houses led the gain, with starts up 11.3%, while higher-density housing rose just 0.6%. Non-residential building activity was 12.1% higher than a year earlier.
Wawn said the flat result for higher-density housing was a particular concern, as that segment needs to do much of the work if national housing targets are to be met.
Small businesses make up 98% of the construction industry, according to the industry body.
Wawn said recent policy decisions "have been death by a thousand cuts for small building businesses". She pointed to the Australian Taxation Office's credit card ban, upcoming changes to trusts, and changes to property investment.
"The cumulative impact of the federal budget, continued interest rate increases and an ongoing global uncertainty have deteriorated the environment," she said.
The Reserve Bank has lifted the cash rate four times in 2026, and markets expect at least one more hike by mid-2027. Ottley said construction is generally the part of the economy most responsive to interest rate changes.
For brokers, this matters on two fronts. A thinner flow of new dwellings could narrow options for clients buying off the plan or building, while the run of rate rises continues to constrain borrowing capacity.
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