Australia’s housing crisis is not a new story — but in 2025 and 2026, the numbers have become impossible to ignore. What began as a structural undersupply problem in the mid-2000s has compounded into one of the most severe affordability and supply emergencies the country has ever faced. Governments at every level are scrambling, construction pipelines are falling short, rental markets are tighter than at any point in recorded history, and millions of Australians are spending record shares of their income just to keep a roof over their heads.
This blog breaks down the key statistics, trends, state-by-state data, and expert forecasts you need to understand where Australia’s housing supply crisis stands right now — and where it is heading.
The Scale of the Shortfall: How Far Behind Is Australia?
The Federal Government’s National Housing Accord set an ambitious target of building 1.2 million new, well-located homes over five years, beginning 1 July 2024 and running through to mid-2029. To meet that goal, Australia needs to complete approximately 240,000 dwellings every single year. In practice, the nation is falling dramatically short.
In 2024 alone, only 177,000 dwellings were completed — a figure that falls 63,000 homes short of what was needed just for that year. Over the first 15 months of the Housing Accord period, 81,000 fewer homes were constructed than required to meet the government’s pace — a deficit of 27% against target. Annual dwelling approvals have stalled at around 196,500 in the year to February 2026, barely moved from where they were at the end of 2025 and significantly below the pace needed.
The National Housing Supply and Affordability Council (NHSAC) forecasts that across the entire five-year Housing Accord period, approximately 938,000 homes will be built — leaving the nation 262,000 dwellings short of the 1.2 million target. When demolitions of existing homes are factored in, net new supply is expected to total just 825,000 dwellings over the five-year period. That is 79,000 fewer than the new underlying demand projected during the same period. And if population growth runs 15% faster than Treasury forecasts — which some economists consider likely — the cumulative shortage could blow out to as many as 200,000 homes.
AMP’s Chief Economist Shane Oliver has estimated that Australia’s cumulative housing shortage is currently tracking between 200,000 and 300,000 homes depending on household size assumptions. Australia has only 420 dwellings per 1,000 people — well below the OECD average of 468 and far behind the European Union average of 517 dwellings per 1,000 people.
Key Supply vs Demand Statistics at a Glance
| Metric | Figure |
|---|---|
| Federal Housing Accord Target (5 years) | 1,200,000 new homes |
| Annual completions needed | 240,000 per year |
| Actual completions in 2024 | 177,000 |
| Homes completed in first 15 months of Accord | ~159,000 (27% below target) |
| Projected total completions over 5-year Accord | 938,000 |
| Projected shortfall vs. Accord target | 262,000 homes |
| Net new supply (after demolitions) over 5 years | 825,000 |
| Shortfall vs. underlying new demand | 79,000 homes |
| Potential shortfall if immigration 15% above forecast | 200,000 homes |
| AMP estimate of cumulative shortage | 200,000–300,000 homes |
| Australia’s dwellings per 1,000 people | 420 (OECD avg: 468) |
| Annual dwelling approvals (year to Feb 2026) | 196,500 |
Why Is Construction Falling So Far Short?
The supply shortfall is not simply a matter of political will or planning delays — though those factors play a role. It is the result of a compounding set of structural and cyclical pressures that have made building new homes deeply difficult and often commercially unviable.
1. Construction Costs Have Exploded
Since the start of the COVID-19 pandemic, construction costs have risen by approximately 40%. Material prices surged during global supply chain disruptions and, while they have now stabilised, they remain significantly elevated relative to pre-pandemic levels. For many higher-density residential projects — units and apartments — the cost to build has overtaken the price at which finished properties can be sold, making those projects economically unviable. As the NHSAC’s State of the Housing System 2025 report states, the single biggest constraint on supply currently is that many housing projects are not commercially viable given current land, financing, and development costs relative to expected sale prices.
2. Residential Land Values Have Surged
Lot values across Australian cities have risen by around 33% since the beginning of the pandemic. This cost increase feeds directly into the feasibility of new developments, particularly greenfield estates on the urban fringe where new detached housing is predominantly built.
3. Labour Shortages Are Systemic
The residential construction industry continues to face persistent shortages of skilled tradespeople. Labour availability forecasts indicate that an overall deficit of labour supply relative to demand will persist throughout the near term. The sector has also experienced high rates of builder insolvencies, which have damaged confidence, reduced capacity, and left unfinished projects in limbo.
4. Interest Rates Remain Elevated
While the Reserve Bank of Australia has begun cutting rates, financing costs for developers, builders, and investors remain structurally higher than they were during the decade before 2022. This raises the cost of carrying construction loans, delays project starts, and reduces the number of viable development sites.
5. Planning and Approval Systems Are Too Slow
Complex land use and planning approval systems across various state and territory jurisdictions continue to slow the pipeline from development application to groundbreaking. While several states have moved to reform their planning systems, the practical effects on new supply are still modest and years away from full impact.
6. Productivity and Innovation Gaps
Australia’s construction sector suffers from persistently low rates of productivity growth compared to other industries. There has been limited uptake of modern methods of construction, prefabricated housing, or industrial-scale building techniques that could bring costs down and speed up delivery.
State-by-State Housing Target Performance
The national shortfall is unevenly distributed. Some states are performing relatively well against their share of the national target; others are dramatically behind.
| State/Territory | Projected % of Housing Target Achieved by 2029 |
|---|---|
| Victoria | ~98% |
| Western Australia | ~80% |
| Queensland | ~80% |
| ACT | ~80% |
| South Australia | ~75% (estimated) |
| New South Wales | ~65% |
| Tasmania | ~51% |
| Northern Territory | ~31% |
Victoria is expected to come closest to meeting its implied housing target, while the Northern Territory faces a truly alarming shortfall, projected to achieve less than a third of its share of national need. New South Wales — home to Australia’s largest city and largest rental market — is expected to deliver only 65% of its target, meaning Sydney’s housing crisis will continue to intensify.
Rental Markets: The Human Cost of Undersupply
For renters, the failure to build enough homes has translated into a prolonged and deepening affordability emergency. The numbers tell a stark story.
National Vacancy Rates at Crisis Levels
Australia’s national residential rental vacancy rate fell to 1.0% in March 2026, according to SQM Research — down from 1.1% in February 2026 and dramatically below the pre-COVID decade average of 3.3%. A balanced rental market is generally accepted to require a vacancy rate of at least 3–4%. At 1.0%, the market remains firmly in crisis territory. The NHSAC uses a benchmark of 2.5% as a minimum threshold for a balanced market — and Australia has been below even that level since 2022.
Every capital city recorded a vacancy rate below 2% in the March quarter of 2026. The tightest markets are Adelaide and Perth, with vacancy rates of just 1.0% and 1.2% respectively. Hobart, despite a small uptick, retains a vacancy rate of just 0.72%, making it arguably the most landlord-dominated major rental market in the country.
Capital City Vacancy Rates (March 2026)
| Capital City | Vacancy Rate (March 2026) |
|---|---|
| Hobart | 0.72% |
| Adelaide | 1.0% |
| Perth | 1.2% |
| Brisbane | 1.13% |
| Sydney | ~1.4% |
| Melbourne | ~1.6% |
| National Average | 1.0%–1.6% (sources vary) |
Rents Are at Record Highs
Australian rents rose 5.2% over the course of 2025 — nearly one and a half times the rate of inflation — pushing the national median rent to $681 per week. Rent growth then reaccelerated in early 2026, with Cotality reporting a 2.1% increase in national dwelling rents in the three months to March 2026, up from 1.2% in the previous quarter. On an annual basis, rents are now 5.7% higher than they were at the same time in 2025.
The five-year cumulative picture is even more alarming. National rents have surged 43.9% over the five years to September 2025 — almost three times the 17.5% rise in wages over the same period. In Western Australia, rents have risen 66% over five years, compared with just 18.5% growth in wages — a ratio of 3.6 times faster.
Rental listings are sitting around 18% below their five-year average nationally, with the shortfall most acute in Sydney (down 27.4%) and Melbourne (down 21.0%).
Rental Affordability by Capital City (2026)
| City | Median Weekly Rent (House) | Median Weekly Rent (Unit) | Notable Trend |
|---|---|---|---|
| Sydney | $855/week | $758/week | Plateaued at record high — “maxed out” |
| Melbourne | ~$590/week | ~$600/week | Unit rents at record high |
| Brisbane | High $600s/week | Mid $600s/week | Still rising, momentum in units |
| Adelaide | Mid $600s/week | Mid $500s/week | Record highs, very tight supply |
| Perth | High $600s/week | ~$620/week | 6.7% annual growth |
| Hobart | Record levels | Record levels | Among tightest markets nationally |
| Darwin | N/A | $699/week | 9.2% annual growth — highest nationally |
The Affordability Crisis by the Numbers
Beyond vacancy rates and asking rents, the broader housing affordability picture in Australia has deteriorated to the worst level on record.
| Affordability Metric | Current Figure |
|---|---|
| Share of median income needed for new mortgage repayments | 50% (December 2024) |
| Share of median income needed for new lease rental costs | 33% (December 2024) |
| Average rental income-to-rent ratio (Q3 2025) | 33.4% of pre-tax income (record high) |
| Pre-COVID decade average rent-to-income ratio | 29.2% |
| Average years to save for a home deposit | 10.6 years |
| Median residential house price | ~$985,900 |
| House price-to-annual-income ratio | 8.0 |
| Share of median income households who can afford to buy | 14% nationally; 10% in Sydney |
| National home price-to-wages ratio | ~14x (record high, vs ~5x before 2000) |
| Projected house price growth in 2026 (KPMG) | 7.7% nationally |
| Perth forecast 2026 house price growth | 12.8% |
| Brisbane forecast 2026 house price growth | 10.9% |
The house price-to-income ratio of 8.0 means the median Australian home costs eight times the median annual household income. Before the year 2000, this ratio sat at around 5x. Australia’s home price-to-wages ratio of approximately 14x is well above comparable economies and has doubled from pre-2000 levels. Only 14% of households on the median income can actually afford to purchase a median-priced home at today’s prices — falling to just 10% in Sydney.
The average time to save a deposit has blown out to 10.6 years, up from around 5–6 years in the pre-pandemic era. For young Australians trying to enter the market without family support, homeownership is increasingly a distant aspiration rather than a near-term reality.
Population Growth Is Compounding the Problem
One of the most significant drivers of Australia’s housing demand is population growth — and specifically, net overseas migration. After collapsing during the COVID-19 pandemic, migration rebounded to levels that have far outpaced what planners and housing developers anticipated.
Treasury estimates projected net migration of 335,000 in 2024–25 and 260,000 in 2025–26. However, current monthly arrival and departure data has been trending back toward annualised levels of approximately 500,000 — suggesting even these elevated Treasury forecasts may be breached. The NHSAC expects underlying demand for housing to stabilise at around 175,000 new households per year from 2025–26. But with supply still running well below that figure, the gap between demand and supply will continue to compound.
New demand for housing has been moderating but population growth, combined with a long-term decline in average household size (from 2.9 persons per dwelling in 1983 to approximately 2.5 in 2022), means the number of dwellings needed continues to rise even when population growth is held constant. A smaller average household size means more dwellings are required to house the same number of people.
The National Housing Accord: Can the Government’s Target Still Be Met?
The Federal Government’s Housing Accord, launched with support from states, territories, and the construction industry, remains the central policy framework for addressing supply. The ambition is clear — 1.2 million homes in five years. The reality is that Australia will miss that target significantly.
Housing Accord Progress at a Glance
| Metric | Target | Reality |
|---|---|---|
| 5-year national target | 1,200,000 homes | ~938,000 projected completions |
| Annual run rate needed | 240,000 per year | ~177,000–190,000 actual/forecast |
| Homes completed in first 15 months | ~199,000 needed | ~159,000 built (27% shortfall) |
| Dwelling approvals (year to Feb 2026) | 240,000+ per year pace | 196,500 |
| Approvals deficit (first 20 months of Accord) | Target pace | 77,660 below target (19% shortfall) |
| Social and affordable housing support (additional) | 55,000 homes | Ongoing delivery |
The government has also committed to supporting an additional 55,000 social and affordable homes during the Accord period, with a range of financial incentives to states and territories. However, the NHSAC does not expect supply to exceed demand at any point during the Housing Accord period. Some of the unmet demand will result in greater reliance on suboptimal shelter such as caravan parks, hotels, and emergency accommodation. Some will contribute directly to a growing homeless population.
The shortfall is expected to narrow over time — the NHSAC projects the imbalance will tighten to around 7,000 dwellings per year by 2026–27 and approximately 3,000 by the end of the five-year horizon — but this is gradual improvement from a very deep deficit, not resolution of the crisis.
Construction Activity: Is There Any Good News?
There are tentative signs that the construction pipeline is beginning to recover from its most constrained period. ABS data shows that building approvals rose 12.83% year-on-year in 2025, with 196,182 dwellings approved between January and December. New dwelling commencements increased 11.59% year-on-year to 48,778 in the September quarter of 2025. AMP forecasts housing completions to average approximately 190,000 per year over the next few years — still well below the 240,000 needed, but a modest improvement of around 10,000 on recent lows.
Construction costs, while still elevated relative to pre-pandemic levels, have stabilised and are no longer rising sharply. Labour shortages, while still present, are showing early signs of easing. Interest rate cuts are expected to gradually reduce financing costs for developers and buyers. These are encouraging signals, but the consensus among economists and housing analysts is that supply recovery will be slow, gradual, and insufficient to close the demand gap within the near term.
Social and Affordable Housing: A System Under Severe Strain
The undersupply of market-rate housing is not the only crisis playing out. Australia’s social and affordable housing system — which provides subsidised housing for low-income households, people experiencing homelessness, and those unable to compete in private rental markets — is also deeply strained.
Around 20% of lower-income renters spent more than half of their income on rent in 2023. In public housing, approximately 22% of residents live in dwellings with major structural problems. Among First Nations households, roughly one in three live in homes with significant structural issues. Only half of current renters expect to ever own a home in their lifetime. Renters are almost twice as likely as homeowners to live in dwellings with major structural defects.
The NHSAC has called for a significant uplift in social and affordable housing to support Australians who depend on these forms of housing as the foundation for building their lives. The Council has also flagged that if the vacancy rate could be raised to its target of 2.5%, this would meaningfully improve tenants’ bargaining power and reduce the risk of evictions.
What This Means for Property Investors and Buyers in 2025–2026
For investors and buyers navigating this environment, the structural undersupply of housing creates a persistent set of conditions that support property values — even as affordability constraints limit how far prices can rise in already-expensive markets. KPMG forecasts national house prices to rise by 7.7% in 2026, and unit prices by 7.1%. More affordable capital city markets are expected to outperform: Perth is forecast to lead with 12.8% house price growth in 2026, followed by Brisbane at 10.9% and Darwin at 10.5%. Melbourne, Sydney, and Canberra are expected to record more moderate gains.
For investors, the combination of record rents, low vacancy rates, and persistent population-driven demand creates a compelling environment for rental income — though gross rental yields have trended lower as property values have risen faster than rents. Capital city unit yields of 4.4% represent a 1.34% premium over house yields.
First-home buyers entering the market in 2026 are being supported by new Federal Government initiatives, including the ability to purchase with a 5% deposit under the government guarantee scheme and the Help to Buy scheme, which allows eligible buyers to purchase homes with the government contributing up to 30% for existing homes and 40% for new builds. These measures are expected to bring tens of thousands of additional buyers into the market — though critics note that additional demand without additional supply risks pushing prices higher rather than improving access.
Working with a Trusted Wealth advisor in Australia can help you navigate the complexities of property investment, superannuation strategy, and long-term wealth planning in an environment where the housing market continues to shift dramatically.
What Needs to Change: The Policy Solutions
The NHSAC has outlined five strategic pillars that it believes are necessary to genuinely address Australia’s housing supply crisis:
1. Boosting Social Housing A significant and sustained increase in government-funded social housing construction, targeting the most vulnerable households who cannot compete in private rental markets.
2. Improving Construction Productivity Addressing the persistently low productivity growth in the construction sector through investment in modern methods of construction, prefabrication, and technology — bringing building costs down and enabling faster delivery.
3. Reforming Planning Systems Streamlining complex, slow, and inconsistent planning and land use approval processes across all state and territory jurisdictions to reduce the time and cost of moving from planning approval to project commencement.
4. Supporting Renters Strengthening tenant protections, improving security of tenure, and working toward a national vacancy rate consistently above 2.5% to rebalance bargaining power between landlords and renters.
5. Fixing Tax Incentives Reviewing tax settings — including negative gearing and capital gains tax concessions — that critics argue incentivise holding and trading existing properties over investing in new supply.
Expert Outlook for 2026 and Beyond
The broad consensus among economists, housing researchers, and government advisors is that Australia’s housing crisis will not resolve itself quickly. Demand is moderating slightly, but supply recovery is slow. Construction costs, labour availability, and planning systems all present ongoing challenges. The NHSAC expects affordability to “broadly stabilise, and in some cases improve a little” over the next four years — but this is a far cry from the structural improvement needed to make Australian housing genuinely accessible for the next generation.
The house price-to-income ratio is forecast to decline slightly — from 8.0 to 7.7 — by 2029. Rent growth is expected to remain elevated but gradually ease below 4% per year by 2027. The national vacancy rate is projected to rise but remain below the 2.5% balanced market threshold for the foreseeable future, meaning rental conditions will continue to heavily favour landlords.
In short: the crisis continues. The numbers are moving in a slightly better direction, but remain deeply problematic for the millions of Australians — renters, first-home buyers, and those in housing stress — who are living with the consequences every day.
Frequently Asked Questions (FAQ)
Q: How many homes is Australia short of right now? A: Estimates vary, but the most widely cited figures suggest Australia’s cumulative housing shortage is somewhere between 200,000 and 300,000 dwellings, with the government’s own advisory council projecting a further net shortfall of 79,000 homes during the five-year Housing Accord period to 2029.
Q: What is the National Housing Accord and is it working? A: The National Housing Accord is the Federal Government’s commitment to build 1.2 million new homes between July 2024 and mid-2029. It is currently falling significantly short of pace, with approximately 938,000 completions projected over the full five years — a deficit of around 262,000 homes against the target.
Q: Why are rental vacancy rates so low in Australia? A: Vacancy rates are critically low because new housing supply has failed to keep pace with population growth and household formation. The national vacancy rate of 1.0%–1.6% is less than half the 3–4% level economists consider necessary for a balanced market. Rental listings are also sitting around 18% below their five-year averages.
Q: What is the average rent in Australia in 2026? A: Nationally, the median rent sits around $681–$824 per week depending on the source and property type. Sydney is the most expensive market, with median house rents of approximately $855 per week and unit rents of $758 per week. Darwin has posted the fastest annual rental growth at 9.2%.
Q: What is driving Australia’s housing shortage? A: The shortage is driven by a combination of rapid population growth (particularly through net overseas migration), declining average household sizes, construction cost increases of roughly 40% since COVID, residential land cost increases of around 33%, persistent labour shortages in the trades, elevated financing costs, low productivity in construction, and slow planning approval systems.
Q: How long does it take to save a house deposit in Australia? A: On average, it now takes 10.6 years to save enough for a home deposit in Australia — up from approximately 5–6 years in the pre-pandemic era. In Sydney, where only 10% of median-income households can afford to buy a median-priced home, the reality for many buyers is even more challenging.
Q: Which state has the worst housing shortage? A: On a proportional basis relative to population needs, the Northern Territory is projected to achieve only about 31% of its share of the national housing target by 2029. New South Wales, home to Australia’s most expensive property market, is expected to achieve only 65% of its target — among the worst outcomes of the larger states.
Q: Will house prices fall in 2026? A: Most forecasters are not predicting price falls in 2026. KPMG forecasts national house price growth of 7.7% for the year, with Perth leading at 12.8% and Brisbane at 10.9%. However, Sydney and Melbourne are expected to see more modest gains due to acute affordability constraints. NAB takes a more conservative view, projecting around 5% growth in the eight capital city index.
Q: Are units a better investment than houses given the shortage? A: Unit rents rose 5.5% in 2025, slightly outpacing house rents at 5.1%, and capital city unit yields of 4.4% represent a meaningful premium over house yields. As affordability constraints price buyers out of houses in inner-city areas, demand is increasingly shifting to units — and more Australians are expected to trade backyards for balconies in 2026.
Q: What government help is available for first-home buyers in 2026? A: The Federal Government’s Home Guarantee Scheme allows eligible first-home buyers to purchase with a 5% deposit and a government guarantee (avoiding lenders mortgage insurance). The Help to Buy scheme provides a government equity contribution of up to 30% for existing homes and 40% for new builds for eligible buyers. State governments also offer various stamp duty concessions and grants for first-home buyers.
