After several slow years, signs of improvement are emerging in the residential construction pipeline.
Activity is lifting, but not yet at a pace that matches population growth or long-term housing targets. The latest Building Activity data from the Australian Bureau of Statistics paints a picture of gradual recovery rather than a full turnaround, with commencements improving but still trailing what is required to rebalance supply.
In the 12 months to September 2025, dwelling commencements increased by 11.2%. That uplift reflects renewed momentum across both detached housing and higher-density projects, following a period where rising construction costs, labour shortages and planning delays suppressed activity. While the increase is encouraging, it comes off a relatively low base and does not close the gap between supply and demand.
Housing Industry Association senior economist Maurice Tapang says the improvement should be viewed in context. He notes that while more dwellings are now under construction, the overall volume remains well short of what is required to meet government targets. The Australian Government’s National Housing Accord aims to deliver 1.2 million new homes over five years, which equates to around 240,000 homes per year. Current commencement levels are still tracking below that benchmark.
Tapang argues the constraint is not buyer appetite. Demand for housing remains strong, underpinned by population growth, household formation and migration. Instead, the challenge lies in the delivery side of the equation. Land availability, infrastructure sequencing, planning delays and workforce capacity continue to dictate how much housing can realistically be brought to market each year. Interest rates, while important for affordability, are not the primary brake on supply.
ABS data shows there were 230,003 dwellings under construction during the September quarter. Of these, 87,323 were new houses, highlighting the continued importance of detached housing in overall supply, particularly in growth corridors and outer metropolitan areas. Multi-unit projects made up the balance, with many still navigating lengthy approval and construction timeframes.
Completions also moved higher during the quarter, rising by 7.5%. This reflects projects that were approved years earlier finally reaching the finish line after delays caused by supply chain disruptions and labour shortages. While completions help ease immediate pressure in rental and owner-occupier markets, they do little to address future shortages unless commencements continue to rise.
From a buyer perspective, the slow recovery in construction has broader implications. Limited new supply tends to place upward pressure on prices and rents, particularly in well-located suburbs where demand consistently outpaces available stock. Established homes in areas with strong infrastructure and amenity continue to benefit from this imbalance, especially where zoning or land constraints limit future development.
Looking ahead to 2026, industry commentary suggests structural issues will continue to shape outcomes. Planning bottlenecks, infrastructure funding gaps and skills shortages are unlikely to resolve quickly. Without coordinated reform across all levels of government, the pace of construction is expected to remain below what is required to materially improve affordability.
For buyers navigating this environment, understanding where supply is constrained and where new stock is realistically coming online matters more than ever. Markets with limited development pipelines and strong owner-occupier demand are likely to remain resilient, even as broader conditions shift.
