Victorian home building hits 12-year low as national targets slip behind

Victoria’s home building sector has hit its weakest level in more than a decade, with new house commencements plunging to their lowest level in almost 12 years, according to the latest Australian Bureau of Statistics (ABS) data.

The ABS Building Activity report for the June quarter showed that Victoria commenced construction on just 7,650 new detached houses, marking the weakest result since 2013.

“Victoria commenced construction on just 7,650 new detached houses in the June quarter 2025, the weakest quarter for the state in almost 12 years and a new low for this cycle,” said Keith Ryan (pictured), HIA executive director Victoria, in a media release.

When including multi-unit projects, the total number of homes started was 13,970, well below the 20,000 quarterly target set under the Victorian government’s housing plan.

The fall mirrors a nationwide slowdown in building activity, with ABS figures showing a 4.4% drop in total dwelling commencements in the June quarter — evidence that the federal National Housing Accord is already falling behind schedule.

“This decline in house building, combined with a moderation in multi-unit commencements, saw Victoria start construction on just 13,970 new homes in the latest quarter, a long way down from the 20,000 homes target the Victorian government has set for itself,” Ryan said.

RBA flags deepening supply pressures

Ryan said that while recent RBA rate cuts and the government’s removal of LMI requirements for first-home buyers were lifting confidence, it would take months before activity picked up on the ground.

“Recent interest rate cuts from the RBA and the Australian government’s removal of LMI requirements for first home buyers look to be bringing more buyers back to the market but it will be a few months before this translates into construction activity on the ground,” he said.

RBA Governor Michele Bullock reiterated that housing supply remains the main driver of rising prices and rents. Appearing before a Senate committee, she said, “We have demand for housing that outstrips the supply of housing and it’s occurring both in housing prices and rents.” Bullock described the shortage as “a structural deficit of supply” and urged governments to “get supply of housing moving.”

Policy barriers continue to hamper Victoria’s recovery

Ryan said Victoria’s recovery had lagged behind other states since the Reserve Bank’s rate-hiking cycle began.

“Since the RBA’s rate hiking cycle, Victoria has been unable to mount a strong and sustained recovery,” he said.

He pointed to high land costs, slow population growth, and increasing state taxes and regulatory barriers as major headwinds.

“Relatively weaker population and labour market dynamics, expensive residential land and increasing state government taxes and regulations on home building, have held back the state while markets like Western Australia, Queensland, and South Australia race ahead,” Ryan said.

Reforms needed to meet housing targets

Ryan called for broad, structural reforms to ease housing delivery costs and help Victoria meet its ambitious housing targets.

“Deeper and wider policy reforms are needed to reduce the taxes, costs and restrictions on home builders, home buyers and home investors, if the Victorian government wants to meet its housing targets,” he said.

He added that policy must support a range of housing types, from greenfield estates to high-density developments.

“All forms of housing need to be supported, including house and land packages in greenfield areas, medium density units and townhouses in middle ring suburbs, and high-rise apartments in inner city and activity centres,” Ryan said.

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