Australia Likely to Fall Short of 1.2 Million Home Target by 2030: Oxford Economics

A crane works next to an apartment building in Melbourne, Australia, on Aug. 7, 2018. (William West/AFP via Getty Images)

According to new Oxford Economics Australia forecasts, Australia is likely to fall short of its 2030 target of over 200,000 homes despite an increase in construction activity.

The economic forecasting agency has predicted that home-building across the country would pick up in the coming period as inflation subsides and government housing policies take effect.

Specifically, its analysts said residential construction would likely reach a new record of 241,900 homes in 2029 alone, bringing the total number of homes built over the five years to 2029 to 940,000.

Nevertheless, this figure was well below the 2030 target of 1.2 million homes the federal Labor government set.

Timothy Hibbert, the head of property and building forecasting at Oxford Economics, said affordability would remain a chronic issue for the housing sector as home shortages continued.

However, he noted that solid housing demand would also increase building activities.

“Activity will inevitably recover in the residential sector,” Mr. Hibbert said.

“All build forms will contribute, driving total dwelling commencements to a new record level by the decade’s end.”

Oxford Economics also forecasted that Western Australia and Queensland would see more robust construction activities among the states and territories.

Meanwhile, data from the Australian Bureau of Statistics showed that total dwelling commencements increased by 0.5 percent in the March 2024 quarter, following a 1.3 percent rise in the December 2023 quarter.

This marked a slight recovery in construction activities after new home commencements dropped by 10.4 percent and 11.8 percent in September and June 2023 quarters.

National Housing Supply and Affordability Council’s Forecasts

Oxford Economics’s new analysis aligned with forecasts by the National Housing Supply and Affordability Council, an independent panel of experts providing advice to the federal government.

In a recent report (pdf), the Council projected that new housing supply would rise by 903,000 between July 2024 and June 2029, with an additional 40,000 social and affordable dwellings to be funded by the federal government.

In comparison, new demand was forecasted to reach 1.08 million homes over the next six years.

At the same time, the report found that housing affordability declined in 2023, with a widespread effect across jurisdictions, income levels, and age groups.

“Aspiring homeowners experienced a decline in their ability to purchase a home. It takes the average prospective homeowner around 10 years to save a 20 percent deposit for an average dwelling,” it said.

“Even with a deposit, only 13 percent of the homes sold in 2022–23 were affordable for a median income household.”

Renters were also in a challenging position as advertised rents jumped by 8 percent in 2023.

Considering all the increases since 2020, rents have soared by 35 percent.

In addition, the rental vacancy rate stood at 1.6 percent, around its lowest level on record and well below what is considered a reasonable rate of 3–4 percent.

While the Council had forecast a shortfall in supply, it warned that affordability could worsen further in the near term.

“There will be a significant shortfall in supply relative to new demand in the 2023–24 financial year and smaller shortfalls in the following two financial years,” it said.

“These shortfalls will be partially offset by very small surpluses of new supply relative to new demand in the final three years of the projection period.”