Build Costs and Approvals: Why supply is still lagging

Australia needs 1.2 million new homes by 2029. Current trajectory: 800,000. The 400,000 shortfall isn't just a number—it's the difference between housing affordability and a generation locked out of ownership.

The Supply Reality Check

Housing completions (2024):

We're not just missing targets—we're going backwards on multi-unit construction, precisely where supply is most needed.

Approval Bottlenecks

Development approval times (2024 average):

The problem isn't just time—it's predictability. Regulatory fragmentation between state, local, and federal requirements creates a compliance maze that adds both cost and uncertainty.

Labor Crisis

Construction employment gaps:

Impact on build times:

Skilled migration in construction trades has helped, but not enough to offset retirements and the pull of mining sector wages.

Cost Pressures

Material cost escalation (2024-25 forecast):

Labor cost growth:

Builder Insolvencies

The sobering statistics:

Rising costs, extended timelines, and fixed-price contracts have created a perfect storm for smaller builders. Each insolvency removes capacity from an already constrained market.

Regional Variations

Surprising supply leaders:

Laggards:

Policy Response

Federal government initiatives:

State-level action:

Investment Implications

For property investors:

1. **Supply-constrained markets:** Areas where approvals are slowest will see strongest price/rent growth

2. **Build-to-rent opportunity:** Institutional-quality rental housing with government support

3. **Regional plays:** Secondary cities with streamlined approval processes

For developers:

1. **Pre-approval value:** Development sites with existing approvals command significant premiums

2. **Scale advantages:** Larger developments benefit from streamlined processes

3. **Cost management:** Fixed-price contracts increasingly risky in volatile cost environment

The 2029 Challenge

To meet housing targets, Australia needs:

**Realistic assessment:** We'll likely deliver 900,000-950,000 homes by 2029, leaving a structural shortage that will support property values and rents well into the next decade.

**Bottom line:** Supply constraints aren't temporary—they're structural. Investors and developers who can navigate the complexity will benefit from a market where demand consistently outstrips supply.