What’s behind the high rate of suicide in Australia’s construction industry?

By Milad Haghani, Associate Professor and Principal Fellow in Urban Risk and Resilience, The University of Melbourne and Nick Haslam, Professor of Psychology, The University of Melbourne

The construction industry is a pillar of Australia’s economy, employing more than a million people.

But construction work is also among the most dangerous industries.

According to Safe Work Australia, construction had the third-highest fatality rate of any sector in 2023. With 3.4 deaths per 100,000 workers, it far exceeded the national average of 1.4.

Many workers also sustain serious injuries, resulting in a 33% higher compensation claim rate than the all-industry average.

Yet despite these well-known physical hazards, the leading cause of death among construction workers is not falling from heights, electrocution, or being struck by heavy machinery.

By a wide margin, it is suicide.

This raises urgent questions: why is suicide so prevalent in this sector, what progress has been made in addressing it and what more needs to be done?

How big is the issue?

Each year, the construction industry loses around 190 workers to suicide. A construction worker is five to six times more likely to die by suicide than from an onsite incident.

Men suicide at higher rates than women, but construction workers are nearly twice as likely to take their own lives as other employed Australian men of the same age.

The rate of suicide, adjusted to allow fair comparison between age groups, is 26.6 deaths per 100,000 male construction workers, compared with 13.2 per 100,000 for other employed men.

This pattern is not unique to Australia. In the United States, construction workers make up only 7.4% of the workforce, yet account for almost 18% of all workplace-recorded suicides.

In the United Kingdom, suicide rates in construction are almost four times the national average. In New Zealand, male construction workers have rates nearly double the general population.

Although rates of suicide are relatively high in the construction industry, rates of suicidal thoughts are similar to other industries. By implication, certain features of the construction sector make those thoughts far more dangerous.

What’s behind the trend?

The nature of work in the sector and its culture appear to play a part in these trends.

Working conditions may also be a factor, as suicide risk is not evenly distributed among workers. Lower-skilled workers such as labourers are most vulnerable.

Job-related pressures are likely to account for this uneven distribution of risk.

Many construction workers have limited control over their work, face job insecurity, workplace bullying and periods of unemployment or underemployment.

Long hours, transient work arrangements and frequent travel often mean extended time away from family and support networks.

Apprentices are particularly exposed. Almost a third report having had suicidal thoughts in the previous year, with similar numbers reporting bullying and reduced wellbeing.

Many do not trust their supervisor as a source of mental health support.

Cultural factors compound the problem.

The industry’s male-dominated environment – 88% of construction workers are men – reinforces traditional masculine norms of self-reliance and reluctance to seek help, which are associated with higher risk of suicide.

A recent review of 32 international studies into this issue identified five recurrent suicide risk factors in the construction industry.

Job insecurity was the most frequently cited, followed by alcohol and substance abuse, lack of help-seeking, physical injury and chronic pain.

Together, these factors form a combustible mix.

What has been done and has it worked?

Although suicide rates remain high among Australian construction workers, the numbers have fallen markedly in the past two decades.

This is a reflection of the combined impact of national mental health initiatives, male-specific interventions and targeted industry programs.

Following the 2003 Cole Royal Commission, which identified suicide as a leading cause of death in Queensland construction industry, the sector began treating the issue as an urgent safety priority.

MATES in Construction, launched in 2008, is a flagship program. Built on worker-to-worker peer support, it has trained more than 300,000 people, backed by nearly 22,000 volunteer “connectors” (who help keep someone safe in a crisis and connect them with professional help) and 3,000 suicide intervention-trained workers.

The strength of this initiative lies in its capacity to build trust through its relatable peer workforce. It frames suicide as an industry-based injustice to be solved collectively through “mateship”.

Evaluations show the initiative reduces stigma, boosts mental health literacy, and increases help-seeking.

Other peer-to-peer support network programs – such as Incolink’s Bluehats Suicide Prevention, which provides education, training and support to workers – are further contributing to this declining trend.

From 2001 to 2019, the construction industry’s suicide rate declined by an average of 3% a year, double the drop seen in other male workers.

What remains to be done?

Although the disparity in suicide rates between construction and other industries has narrowed, it is still substantial. To reduce it further, prevention efforts will need to be extended and enhanced.

Workplace initiatives must continue to expand their reach and build a culture in which struggling workers feel supported to seek help and their peers feel capable of offering it. Programs must also target younger and less skilled workers, who are at elevated risk.

Similarly, awareness among families about the heightened risks in this sector could help them identify warning signs earlier and support workers in seeking help.

Efforts must continue to remedy workplace conditions known to contribute to suicide risk, like job insecurity, long hours and remote work.

It is particularly important to do so during industry downturns when insecurity rises.

Finally, we must reckon with the impact of high rates of musculoskeletal pain among construction workers.

Pain is associated with two major risk factors for suicide – poor mental health and substance misuse – so efforts to address it might play a role in reducing suicide’s terrible human cost.

If you or someone you know is struggling, help is available. In Australia, you can contact Lifeline at 13 11 14 for confidential support.

This article is republished from The Conversation under a Creative Commons license. Read the original.

The RBA has cut rates for the third time this year. More relief may be on the way

By Stella Huangfu, Associate Professor, School of Economics, University of Sydney

The Reserve Bank of Australia lowered the official interest rate by 25 basis points to 3.60% at its meeting today, marking the third cut this year. The move follows reductions in February and May, and comes after a pause in July that surprised analysts and upset mortgage holders.

The Reserve Bank cut its outlook for economic growth, and said inflation was back within its target band. In a post-meeting press conference, Governor Michele Bullock said:

The forecasts imply that the cash rate might need to be a bit lower than it is today to keep inflation low and stable, and employment growing, but there is still a lot of uncertainty. So the board will continue to focus on the data to guide its policy response.

Markets had widely anticipated the decision. Futures pricing put the odds of a cut at nearly 100%, and all four major banks had forecast at least one more reduction before the end of the year. A Reuters poll last week found all 40 economists surveyed expected the Reserve Bank to lower rates this week.

Bullock told reporters the bank did not discuss a larger rate cut. The Commonwealth Bank was the first to pass on the rate cut to mortgage rates. Other banks followed suit.

The economy is cooling

The Reserve Bank is encouraged by the sharp fall in inflation. This is the second straight quarter with its preferred measure of core inflation, the trimmed mean, below 3% — a marked turnaround from 2023, when inflation was well above target. Headline inflation has slowed to 2.1%, comfortably inside the 2–3% target range, while the trimmed mean sits at 2.7%.

As the Reserve Bank noted, “inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and potential supply closer towards balance.”

At the same time, the economy is clearly cooling. Gross domestic product (GDP) grew just 0.2% in the March quarter and 1.3% over the year, well below the bank’s earlier forecasts.

The unemployment rate has climbed to 4.3% and job ads are trending lower. Household spending remains subdued, with retail sales flat and consumer sentiment still negative.

In its quarterly policy statement, the bank trimmed its GDP forecast for December 2025 to 1.7% from 2.1%, based on slower consumer spending and business investment. The reduction suggests further rate cuts will be needed to support growth.

Minutes from last month’s policy meeting showed the decision then was finely balanced. Three members favoured cutting in July, while six preferred to wait for more inflation data.

Today, all nine board members voted unanimously for a cut — signalling the Reserve Bank is now more convinced about acting early, choosing to provide extra support now rather than risk a sharper slowdown later.

A cautious outlook

The Reserve Bank’s statement kept the door open to further cuts, noting that rates could fall again if inflation remains contained and economic activity softens further.

The Board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply.

Markets are still betting on additional cuts this year. Traders now see a high probability of another 25 basis point cut in November, with markets suggesting the cash rate could fall to around 3.35% by year-end.

Major bank forecasts point to lower rates ahead: NAB expects a cash rate of 3.10% by February 2026, while Westpac sees 2.85% by mid-2026. While the pace and scale differ, the consensus is that today’s cut is unlikely to be the last in this cycle.

Global uncertainty

The decision comes as the slowdown becomes more evident across key indicators. The economy is barely growing, the job market is weakening, and inflation has returned to the central bank’s target range. Wage growth is still above inflation but is no longer accelerating, easing fears of a wage–price spiral.

Australia’s move mirrors a global trend toward lower rates.

In the United States, the Federal Reserve cut official interest rates three times in the second half of 2024 and has since held steady.

In Europe, the European Central Bank paused at its July meeting, after eight straight 25 basis point cuts since June 2024, balancing weak growth in economies like Germany and France with stubbornly high inflation in other parts of the euro area.

Bullock noted at the press conference that Australia had not raised rates as aggressively as other central banks to tame inflation, and therefore would be more modest in the cuts:

Because we didn’t take rates as high as some other countries, it may be that we don’t need to reduce rates as much either.

By lowering the cash rate to 3.60% today, the Reserve Bank is showing it’s ready to act more quickly to help the economy as prices slow and growth weakens.

Markets expect more cuts ahead, but the pace will depend on whether inflation stays in check and the slowdown deepens. The interest rate cut cycle is clearly still in motion — and today’s decision suggests it may have further to run.

This article has been republished from The Conversation under a Creative Commons license. Read the original article.

Addressing the housing crisis for vibrant cities

By Nicola Lemon

Nicola Lemon is a partner at KPMG and the National Social and Affordable Housing Lead. Nicola brings a wealth of experience to her role, having dedicated her purpose-driven career to increasing the availability and affordability of housing. Nicola is well recognised as an influential CEO, Chairperson and leader. Her previous roles include 15 years as CEO of Hume Community Housing, and a nine-year tenure as both Chair of PowerHousing Australia and the Vice Chair of the International Housing Partnership. Nicola is currently a member of the Property Council of Australia’s National Build to Rent Committee.

The housing crisis in Australia was a key theme in the 2025 federal election, however our housing system has been under stress for decades.

According to the KPMG residential property market outlook for January 2025, national house prices have increased by 5.1 per cent, rent inflation sits at 6.7 per cent and it takes roughly 50 per cent longer to build a house than it did four years ago.  

Price increases in major cities have outpaced wage growth for decades, putting significant pressure on low- and middle-income earners.

The absence of significant social housing investment over the past 30 years has also exposed lower-income households to an increasingly unaffordable private housing sector. This structural undersupply was exacerbated by the COVID-19 pandemic, which led to steep increases in construction costs and rendered large swathes of Australia commercially unfeasible for development despite strong demand. 

This is prime fuel for deepening wealth, health and geographical inequality, declining productivity, increasing homelessness and generational disadvantage, and cannot be fixed with just one solution. For decades, housing has been considered an investment commodity, a wealth creation tool, rather than a human right that is key to building a fair and thriving society.

Why is diverse housing so important for vibrant cities? 

There’s not a city council in Australia that doesn’t want their region to be fair, thriving and vibrant. Vibrant cities are essential for economic growth, cultural exchange, high quality of life and social interaction – they attract businesses, talent and diverse populations, while providing rich experiences and amenities.  

Diversity of housing, tenure, typology, amenity, accessibility and affordability helps create thriving urban environments by ensuring inclusivity and sustainability, which in turn fosters stable communities, reduces inequalities and supports local economies by keeping essential workers close to their jobs. 

In KPMG’s ‘Keeping us up at Night 2025’ report on social issues concerning business leaders, housing availability and affordability has risen to the top, up from fifth a year ago. The lack of meaningful progress on housing affordability was seen as the number one issue, not only for the immediate outlook but, given the runway required to achieve improvements in supply, also for the medium-term outlook. 

The human reality 

The housing crisis is affecting some groups more adversely than others.  

Essential workers like first responders, teachers, hospitality staff and cultural contributors are the lifeblood of most cities. As these jobs tend to come with lower pay, irregular shifts or fluctuating income, many are unable to afford to live near where they work. In fact, an Anglicare 2024 rental affordability report showed that workers on a full-time minimum wage, could afford less than 1 per cent of all rental properties. 

Another group disproportionately affected by the housing crisis in Australia is women. Between 2011 and 2021, the number of women aged 55 and over experiencing homelessness increased by 40 per cent. More caring responsibilities fall on women, and women are the least protected in terms of their savings, asset accumulation and superannuation balances. As such, affordable, flexible, safe and secure housing options close to workplaces are essential for women, and central to combating gender inequality.

What are the solutions? 

KPMG’s Shaping Cities of Value report explains that inclusive housing and polycentric cities can enhance community engagement and economic activity. Diverse models of housing can mitigate economic and social disparities, while innovative construction methods and inclusive planning can accelerate the creation of dynamic and sustainable urban landscapes. 

We need solutions that are: 

• Focused on increasing social and affordable housing: Australia will need over 1.1 million social dwellings by 2037 according to AHURI research. To address this, ideally one in every 10 homes should be social or affordable housing (currently sitting at under one in four).

• Approved by all sides of politics: a bipartisan Commonwealth housing strategy that treats social and affordable housing as essential infrastructure, with cooperation from state and local governments, is crucial for creating effective partnerships across the housing eco-system. 

• Replicable, scalable and certain: national housing targets, backed by a pipeline of land release and government investment, providing certainty and reducing sovereign risk. 

• Invested in accelerating production and capabilities: our skills shortage challenges require focus on construction worker training and the time to construct requires advancing technologies for sustainable, efficient and faster production of homes. 

• Mastering density planning: developments that integrate mixed-use spaces, efficient designs, vertical buildings and an inclusive approach for optimal land use and quality of life. 

• Including diverse typology options: vibrant cities must meet the physical housing needs of their citizens, e.g. culturally appropriate housing, large and small generational living options, ageing in place, and solutions for differing mental and physical needs. 

• Promoting mixed tenure: citizens need access to home ownership options, secure affordable and private rental properties, student specific housing, youth foyer models, co-living options, shared home ownership, aged care homes, specialist disability accommodation and social housing in perpetuity. 

• Developed in partnership with community housing providers (CHPs): CHPs understand local needs, deliver tailored services, and collaborate with government and private sectors to tackle housing challenges. Policy certainty enables CHPs to invest in skills, resources and growth with confidence, attract investment and deliver quality housing for communities in need.

Significant systemic reform, government support and industry innovation are needed to improve housing supply and affordability. A consistent and collaborative effort across the housing ecosystem is required. By adopting these approaches and being innovative, we can tackle economic disparities, support communities and watch our cities thrive.

This article is republished from CEDA under a Creative Commons license. Read the original article.

Oliver's Insights: Seven key charts on the state of the Australian property market

By Dr Shane Oliver, Head of Investment Strategy and Chief Economist, AMP

Key points

• The Australian housing market remains far more complicated than many portray it to be.

• The Australian housing is cycle is turning up again; falling interest rates are the key driver; along with a chronic undersupply of homes of 200,000-300,000 dwellings; this partly reflects a surge in building times; poor affordability is a key constraint though; but it varies significantly between cities; and finally, mortgage arrears remain low.

• Average prices are expected to rise 5-6% this year boosted by falling rates but constrained by poor affordability.

Introduction

The Australian residential property market creates much consternation. On one level there is the debate about the outlook for home prices with some real estate spruikers still wheeling out versions of the old “property will double every seven years” line versus property doomsters at the other extreme saying it’s overvalued and overindebted and so a crash is inevitable. The problem with the former is that it implies the already high ratio of home prices to incomes will double again over 12 years! The trouble with the doomsters is that they’ve been saying that for decades. On another level there is much understandable angst about affordability with some blaming investors and property tax breaks versus others seeing it as largely due to poor housing supply relative to demand. As always with these things there is no black or white answer. To shed some light on this here’s seven key charts on the state of the housing market.

First – the property cycle looks to be turning up again 

After a brief dip of just 0.3%, national average property prices have been rising steadily from February (with Cotality data pointing to another 0.5% rise this month) indicating that they have entered a new cyclical upswing. 

Source: Cotality, AMP

So far, the gains have been broad based with the soft cities of Melbourne, Hobart, Canberra, Darwin and Sydney now picking up at the same time that the boom time cities of Brisbane, Adelaide & Perth remain strong. 

Second – interest rates are a key driver

Interest rates matter a lot to the property market because lower rates boost the relative attractiveness of property as an investment and allow home buyers to borrow more. And vice versa for higher rates. Of course, the impact of interest rates can be swamped by other factors at times, as was the case in 2023-24 with the population surge and weak supply. Lower rates are a key driver of the current upswing in prices. As can be seen in the next table, the start of rate cutting cycles since 1982 has been associated with higher home prices over the next 12 and 18 months in five of the last seven rate cutting cycles, providing there is no recession. The average gain over the subsequent 12 and 18 months is 3.9% and 8%.  Our base case is for 0.25% RBA rate cuts in August, November, February and May. With increasing signs of labour market weakness this may occurs faster with back to back cuts in August and September. 

Cotality. Australian recessions are in red. The GFC is in blue. Source: RBA, Cotality, AMP

Third – Australian housing is chronically undersupplied

This has been the case since the mid-2000s when immigration levels, and hence population growth, surged and the supply of new homes did not keep up. Our assessment is that the accumulated housing shortfall (the green line in the next chart) is around 200,000 dwellings at least and possibly 300,000 depending on what is assumed in terms of the number of people per household.  

Source: ABS, AMP

The economic reality is that when underlying population driven demand for housing exceeds its supply prices rise and that is what we have been seeing for the last twenty years. The capital gains tax discount, negative gearing and foreign demand may have played a role, but they have been a sideshow to this demand/supply imbalance.

Fourth – home building completion times have surged

Part of the solution is to slow immigration (and hence population) growth to levels more in line with the ability of the housing industry to supply homes. And immigration has been falling lately. But it’s also about boosting supply and if we want to reduce the accumulated undersupply it’s critically important that Federal and state governments retain the Housing Accord commitment to build 240,000 dwellings a year (or 1.2 million over five years), compared to around 180,000 over the last year.

The next chart shows part of the problem. Over the last decade the time taken to build a house from approval has risen by 57% and that for units has increased by 65% reflecting increasing regulations, rising costs, labour shortages, etc. To meet the Housing Accord target we need deregulation, measures to boost the number homebuilders, a greater focus on units and finding more ways to lower costs (like pattern plans in NSW, smaller houses and greater reliance on wood than bricks and concrete).

Source: ABS, AMP

Fifth – Australian housing is very expensive  

Chronically deteriorating housing affordability in Australia has been evident since the 1990s. It’s clearly evident in rising home price to wage and household income ratios (with the latter adjusting for the increase in two income families), a rise in the years taken for an average earner to save a 20% deposit from around 4 years 40 years ago to around 10 now and the ratio of home prices to rents (which is a bit like a PE for shares) adjusted for inflation being around 30% above its long term average level.

Source: ABS, Cotality, AMP

The expensive nature of Australian property and the high level of debt that goes with it leaves the economy vulnerable should high interest rates or unemployment make it harder to service loans and is leading to rising wealth inequality. In the near term though it may constrain the extent of the upswing in property prices through this cycle. 

Sixth – it’s also very diverse 

While we often refer to “the Australian property market”, in reality there is significant divergence between localities resulting in diverse cycles. The divergence is reflected in measures of valuation. The next table shows the percentage difference between price to annual rent ratios adjusted for inflation relative to their average since 1983. On this basis while houses are 30% overvalued, units are only 1% overvalued. And Perth and interestingly Melbourne stand out as the least overvalued markets in terms of houses and both are actually undervalued in terms of units.

Source: REIA, AMP

Finally – mortgage arrears are still low 

Reports of mortgage stress have been common for the last two decades. There is no denying housing affordability is poor, debt is high, and many households are still suffering significant mortgage stress. But despite this mortgage arrears rates remain remarkably low at less than 1% on average which leaves them low in international comparisons too. They are higher for those with high loan to valuation (LVR) ratios and high loan to income (LTI) ratios but even here they are still low and have been falling lately.

RBA Financial Stability Review, April 2025

The low level of arrears partly reflects strong lending standards in Australia combined with the strong jobs market and a high level of savings buffers coming out of the pandemic.  So absent a shock, like much higher unemployment, don’t expect an avalanche of distress listings.

Where to now?

Forecasting property prices is fraught. But our base case is for property prices to rise 5 to 6% this year driven by rate cuts and the chronic housing shortage but with poor affordability constraining the upswing. The main downside risk is that rising unemployment and a delay in rate cuts depresses buyer demand, but the main upside risk is that another bout of FOMO takes hold as rates fall.  The key for savvy investors, is to look for properties offering decent rental yields.

This article was republished with permission by AMP. Read the original article here.

Subdued outlook for Australia’s construction industry

By Oliver Nichols, Director - Rider Levett Bucknall

Oliver Nichols is a Director of RLB in New South Wales, where he has been based since 2008.

With more than 25 years’ experience in quantity surveying and commercial advisory, Oliver specialises in cost planning, financial reporting and post-contract cost management. He has played a key role in delivering some of Australia’s most complex placemaking and infrastructure projects, including the Sydney Metro integrated stations at Martin Place, Gadigal and Victoria Cross, Central Barangaroo and the Sydney Football Stadium.

In June 2025, Oliver was appointed Oceania Director of Research & Development, where he now oversees the firm’s regional research strategy and major publications, including the RLB Crane Index, Rider’s Digest and the quarterly Market Intelligence Reports. His dual focus on project delivery and market insight ensures that RLB’s data and commentary are informed by real-time experience on the ground.

Rider Levett Bucknall’s latest Q2 2025 Construction Market Update for Australia presents a cautious outlook for the sector, as global instability and local constraints continue to disrupt delivery, inflate costs and dampen investment appetite.

Read the full report here

Geopolitical risk compounds domestic challenges

The ongoing conflicts in the Middle East and Ukraine are placing renewed strain on global supply chains, escalating the cost of fuel, raw materials and shipping. Within Australia, this has collided with persistent labour shortages, rising interest rates, and tighter regulatory conditions—contributing to delays, cost overruns and heightened project risk.

Oliver Nichols, Director of RLB Oceania Research & Development, said the complex interaction between global and domestic forces was redefining the market outlook.

“Developers are grappling with tighter margins, stretched delivery timelines and softening confidence. Meanwhile, large-scale infrastructure projects are facing increasing viability challenges—especially where budgets are locked in or public funding is limited.”

Material costs and supply chain volatility pressure delivery

RLB has observed rising prices for key inputs including fuel, steel, copper and aluminium. In some locations, this is being compounded by delays in the delivery of imported mechanical and electrical components, particularly for specialist works.

These material and logistical constraints are influencing not only delivery timelines but also cost planning and investment decisions. Housing affordability, mortgage rates, and infrastructure feasibility are all being affected.

Industry insolvencies on the rise

Recent data shows a notable increase in construction sector liquidations, particularly among subcontractors and small to medium enterprises (SMEs). In an environment marked by slow approvals, project delays and tight payment terms, even marginal cost increases are forcing some firms into insolvency.

“The risk of rising insolvencies within the construction supply chain continues to be a concern,” said Nichols. “When projects are delayed or disrupted, it creates cascading impacts across all tiers.”

Adaptive strategies emerging across the sector

In response, some construction firms are diversifying their supply chains, adopting digital tools to improve workflow visibility and renegotiating contracts to include escalation clauses. These measures are designed to manage cost risk and enhance resilience.

Governments are also responding. The recently released Blueprint for the Future by the National Construction Industry Forum outlines targeted recommendations to boost productivity, workforce capability, and industry stability. However, implementation and impact will take time.

Forecasts signal varied conditions across cities

RLB’s Tender Price Index for Q2 2025 indicates that cost escalation continues nationwide, though rates vary by region. Cities such as Brisbane, Townsville, and the Gold Coast are forecast to experience sustained upward pressure over the next five years, while Canberra and Sydney are expected to see more moderate growth.

Regional market insights

• Adelaide: Growth continues across defence, health, renewables and infrastructure sectors, but contractor and subcontractor capacity remains tight.

• Brisbane: Government programs in health, education and corrections are sustaining pipelines, but the private sector remains constrained by cost feasibility.

• Canberra: Positive outlook underpinned by major ACT Government initiatives, including North Canberra Hospital and Canberra Theatre Redevelopment.

• Darwin: $2.74 billion committed in the 2025–26 Territory budget for infrastructure, including public housing, education and corrections upgrades.

• Gold Coast: Cost pressures persist but are easing slightly with greater subcontractor availability in some sectors.

• Melbourne: Labour shortages continue to strain delivery and drive cost escalation. Insolvencies are rising as financial stress deepens.

• Perth: Market operating near capacity, with high demand in both regional and metropolitan areas fuelling pricing pressure.

• Sydney: Labour remains the critical constraint, particularly on public infrastructure projects. Specialist imports continue to experience delay and cost volatility.

• Townsville: A reduction in major project tenders has moderated pricing levels, shifting from opportunistic to balanced conditions.

Outlook: constrained opportunity amid heightened risk

While governments and industry stakeholders are acting to stabilise conditions, the path ahead remains uncertain. As geopolitical uncertainty persists and domestic pressures continue, Australia’s construction industry is likely to remain in a climate of heightened risk, fragile confidence and uneven opportunity.

This article was republished with permission by RLB. Read the original article here.

Mortgage arrears remain contained despite high rates and cost of living pressures

By Tim Lawless, Research Director at Cotality

While mortgage arrears have risen from record lows, the portion of borrowers falling behind on their repayments remains well below 2% of the Australian loan book.

APRA data measuring the proportion of borrowers who are overdue or impaired on their mortgage repayments ticked slightly higher through the March quarter, from 1.64% in Q4 2024 to 1.68% in Q1 2025. Despite the subtle lift, mortgage arrears remain below the recent high of 1.86% recorded in Q2 2020. Mortgage arrears include loans that are 30-89 days overdue as well as those categorised as non-performing. A non-performing loan is one where the borrower is 90 days or more past due on their repayments or where the lender considers the borrower unlikely to pay their credit obligations without recourse from the lender. A more detailed breakdown of mortgage arrears can be found in the latest Financial Stability Review from the RBA. The review showed that while highly leveraged borrowers and lowerincome households tend to have higher arrears rates, even in these categories, arrears are generally low and trending lower. Mortgage arrears for borrowers with a loan to valuation ratio of 80% or higher peaked around 2.5% in 2024 but are now falling, while borrowers with a loan-to-income ratio above four reached roughly 1.5% and are also trending lower.

Several factors help explain how the vast majority of mortgagors have kept on top of their mortgage repayments during a period of elevated interest rates and severe cost of living pressures, including strong prudential standards, tight labour markets, extremely low levels of negative equity, and accrued liquidity buffers. Lending standards have been unquestionably strong throughout the recent cycle, with a consistently low portion of mortgage originations considered ‘risky’. Interest-only lending comprised 19.7% of originations in the March quarter and has consistently held well below the previous temporary limit of 30% set by APRA between 2017 and 2018. High LTI and high DTI lending remains well below pre-rate hike levels, tracking at 3.1% and 5.8% of loan originations respectively in Q1. Similarly, high LVR lending has come in around 7% of originations or lower since mid-2022.

The mortgage serviceability buffer, which assesses prospective borrowers on their ability to repay a mortgage at three percentage points above the current mortgage rate, has also played into the resilience of borrowers. Lifting the buffer from 2.5 percentage points to 3.0 percentage points in October 2021 has helped to lower the default risk, even though mortgage rates have risen a lot more than three percentage points from their 2022 lows. Although interest rates are now falling and expected to reduce further, there has been no sign from APRA that the serviceability buffer will be lowered. While tight lending policies have contributed to financial stability and provided protection for borrowers, there is a counter argument that lending policies may be too tight, reducing access to credit.

The ‘double trigger’ hypothesis for higher mortgage rates

The RBA has previously theorised that higher mortgage arrears rates would need to be predicated by a “double trigger” of both an inability to repay the loan and for the loan to be in a negative equity position. So far, most borrowers have retained their ability to pay despite higher debt servicing costs, thanks to persistently tight labour market conditions, while instances of negative equity remain rare across the Australian housing market. Debt servicing costs have risen substantially over the recent rate cycle. Variable mortgage rates have roughly moved in-line with the cash rate, bottoming out below 3% in 2022 before surging by around four percentage points. A borrower with a $750k mortgage saw their monthly repayments rise by around $1,550+ (depending on the type of borrower and loan) between the low point and high point of the rates cycle.

However, most Australian’s have retained an ability to service their mortgage through gainful employment, with labour markets holding tight. The unemployment rate came in at 4.1% in May and has held around this level or lower since early 2022. Similarly, underemployment, which measures workers who want to work more hours, remains close to multidecade lows. The second component of the ‘double trigger’ hypothesis relates to negative equity in housing markets – or simply, where the value of property is less than the debt owed. The RBA estimated in their most recent Financial Stability Review that less than 1% of households are experiencing a negative equity situation. Given the low portion of homes in negative equity, most borrowers facing financial hardship should be able to sell their property and clear their debt before moving into default.

Another factor staving off higher arrears relates to an accrual of savings through the pandemic. The household saving ratio held above 10% between mid-2020 and early 2022. Households have been able to draw down on their savings as higher debt servicing costs and cost of living pressures eroded balance sheets. Although it's harder to measure, we have probably also seen households tightening the purse strings, acting out the “wagyu and shiraz” scenario, where households pull back on non-essential spending, focus on debt repayments and fund essential cost of living expenses. The “wagyu and shiraz” reference relates to the federal court ruling from Justice Nye Perram in the ASIC v Westpac hearing: "I may eat Wagyu beef everyday washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare.” Overall, it’s likely mortgage arrears will trend lower from here as mortgage rates continue to reduce and cost of living pressures ease further. With housing values once again on a broad-based rise, instances of negative equity are expected to remain a tiny portion of Australian housing stock, providing further resilience to default.

This article was republished with permission from Cotality. Read the original article here.

Property Market Overview: July 2025 By Scott Keck

By Scott Keck | Chairman, Charter Keck Cramer

Scott Keck is Chairman of Charter Keck Cramer. Scott has over 50 years’ property valuation and corporate real estate experience across the national markets. As an experienced independent practitioner Scott provides specialist strategic and mediation consulting services, including an emphasis on land acquisition for major infrastructure projects. A highly regarded and regular contributor to the national media and business magazines, Scott has published over 500 articles on topics related to the property market. Scott is a member of Charter Keck Cramer’s Board of Directors.

Australia has become a very property centric society, both for individuals and also significantly in the corporate sector for Managed Funds and REITS, due to a very favourable and inducing tax and superannuation environment. This has sustained a long period of almost uninterrupted growth during which, as a community, we have become faithfully confident in compounding performance and reliable risk adjusted returns.  We are, however now probably entering into a phase of possible Capital Gains Tax reform and a changing property investment and development market which will be affected by both positive and negative influences, summarised as follows:

Positives

1. Baby boomer capital

2. Acute supply shortage - strong demand at right price point

3. Government subsidy for social and affordable housing

4. Interest rates easing

5. Costs slowing

6. Techno advance / modern methods, prefab

7. Gradually supportive Government policy

8. Economic step back from stagflation

Negatives

1. Covid legacies

2. High construction costs

3. Low affordability

4. Contractor insolvency

5. Regulatory and zoning constraints

6. Infrastructure deficiencies and levies

7. Environmental and climate concerns

8. Foreign investor taxes

9. Financial complexities including statutory charges and capex  

10. Global uncertainties

Whilst I don’t underestimate the risk, I do view residential development mainly as a process of calculated SUPPLY whereas commercial development including retail, industrial and office is more complex, carries greater risk and rather than providing supply, provides negotiated, invariably underwritten SOLUTIONS … both of course require patience and persistence but the commercial sector generally requires higher levels of development management, negotiation skills and of course commencing capital.  Usually participants are one or the other but not both. If you want to be involved I think you need to strategically commit to one sector.

Notwithstanding current headwinds which require planning, taxation and labour reforms and which also include sector insolvencies and slow design and construction innovation, there are immediate and emerging opportunities.  Amongst current projects and proposals in our office or of which we are aware I mention:

1. Downsizer luxury apartments

2. Social and affordable housing

3. Medium rise residential and mixed use projects

4. Land lease projects

5. Residential to rent / BTR with a twist (student and retirement accommodation)

6. Value add v. passive

7. Regional opportunities

8. Adopting existing building built form provides planning and timing advantages

9. Master plan centres

10. PPPs … working with Government

11. Office refurbishments

12. Large mixed use inner urban infill sites

Having summarised examples of current potential viability, the question may well be how does one find such opportunities ... the answer is in part that as always there is the entrepreneurial awareness of opportunity and intuition that successful developers and investors demonstrate … those who live and breathe the property markets … but even they increasingly rely upon the support, guidance and analysis of research agencies. They may intuitively sense an opportunity, but invariably through the process of research discard many prospects before making a commitment.  And to be emphasised, don’t underestimate the relatively recent strong resource of AI … more often than not is likely to point you in roughly the right direction.

Another source of engagement which is quite common is to be willing to consider Joint Venture opportunities …there are many property professionals, particularly for example architects, planners, project and development managers, even valuers who may have insight and viable proposals but lack capital ... if you maintain an active and wide property network you will experience that awareness invariably leads to opportunity. The majority of projects that pass through our office do involve joint ventures one way or another … usually passive equity capital joining with development and project management expertise. 

There are mixed views about the challenge of residential under-supply, yet the need for long-term population growth through migration to boost productivity. Inevitably, Australia’s economic future security depends on a substantial increase in economic growth which means a much larger population which will be sourced through migration mainly from the Asian region, China, India, Bangladesh and Pakistan. As our community embraces this prospect we will also experience cultural change as our population transitions to a higher Asian proportion of our population. Simultaneously there will inevitably be an increase in the percentage of households that rent rather than owner occupy.

As community growth and cultural and economic impetus feeds mainly into the economies of Victoria and New South Wales, there will be increasing opportunity for residential and infrastructure development and investment across all sectors. Currently there may understandably be some negativity about the property sector in Victoria but the medium to longer prospects offer assessable opportunity as statewide community expansion drives continued demand in all built form sectors.

This article has been republished with permission from the author, Scott Keck, Chairman Charter Keck Cramer.

Cities are heating up the planet – how they can do more to fight climate change

Photo by simmo333

By Anna Hurlimann, Associate Professor in Urban Planning, The University of Melbourne and Sareh Moosavi, Lecturer in Environmental Planning and Design, The University of Melbourne

Cities have a central role to play tackling climate change. They contribute 67–72% of the greenhouse gas emissions which are heating up the planet.

At the same time, cities are increasingly at risk from global warming. Flood, fire and drought are affecting everything from the cost of insuring homes and businesses, through to impacts on health and safety.

This is critical given 90% of Australians live in urban areas. Globally, cities are home to more than four billion people.

Our new study identifies 16 priority actions to address climate change in the construction and management of cities.

Building smarter

Climate change must be a key consideration when designing, building and managing our cities. The emissions generated need to be minimised and eventually eliminated.

We must build in locations, and in ways, that reduce climate risks. But policies governing how our cities are designed and constructed don’t achieve this.

A recent study of three local government areas identified only limited action on adaptation and mitigation. Other research has found few urban development policies include carbon reduction goals that meet international targets.

The National Housing Accord will see more than one million houses built by 2029. These new homes must address the climate challenge.

16 areas for priority action

The priority areas in our new study were informed by interviews with more than 150 stakeholders working in urban planning, architecture, landscape architecture, urban design, sustainability, construction and property.

The actions they identified cover the entire life cycle of the built environment.

One of the first barriers to overcome is the perceived lack of agency among industry professionals to initiate or demand climate action. They perceive others, such as property owners or clients, to have more influence.

Climate change risks should be identified in the early stages of planning new developments, backed up by effective tools to make risk identification and action easier:

There were areas that were identified as being flood prone or risk prone. But there was no strategy to deal with what happens to those areas – An urban planner

Once specific projects are being considered it is important to prioritise early stage climate assessments, supported by policies which mandate climate action:

Everyone has good intentions but without big formal legislation around it, everyone’s just sort of making their way in the dark – A construction industry professional

In the design stage, steps to improve the climate knowledge and skills of the workforce beyond disciplinary boundaries is critical. The selection of low-impact products and materials will also help ensure design is more climate responsive.

Photo by carlazwies

The highest number of hurdles to climate action were found to occur during the costing and approvals stage. Participants spoke of a highly competitive building industry. If climate change initiatives introduced at an earlier stage aren’t required by law, they are likely to be cut.

unless there’s something in it for them in terms of return on investment, it’s going to be hard to get them to do it, unless we make them – An urban planner

During the construction phase, product and material substitutions that have detrimental environmental impact should be eliminated. Innovation should be encouraged:

If you want to push the envelope a little bit in terms of using recycled materials […] that’s a bit of a barrier. To push innovation is difficult – A landscape architect

Post-construction

Once construction is complete and buildings and public spaces are being used, it is important to invest in a thorough evaluation process. Building users should be involved to ensure buildings are maintained for optimal climate outcomes:

[We] tried to achieve the six star rating […] the client has to maintain it [the building] for a year, and that’s when things start to fall off – An architect

When it comes to area upgrades or building renewals, advocating for reuse and materials circularity is important. But the custom of demolishing and building anew, is hard to shift:

The reuse of the existing building obviously generates significantly less waste and involves less material. So, design decisions and strategic decisions around using existing buildings is really important – An urban designer

Working together

This is a time of significant change in our urban areas.

We need to make sure climate action is embedded in every stage of decision making. This may mean more efficient use, and reuse, of the existing built stock. This will require an overhaul of policies regarding building retrofits, and a change in mindsets.

The priority actions to address climate change in cities can be implemented across a range of levels for:

• individual professionals – pursue development of their climate change skills, including opportunities provided by professional associations

• professional practices – review internal processes to ensure climate action is mainstreamed across projects, and in company decision making

• universities teaching built environment professional degrees – embed climate change knowledge, skills, and competencies across the curriculum

• governments at all levels – review policy settings to mandate mitigation and adaption.

By addressing these actions, we can collectively work towards achieving our emission reduction targets and making sure our cities minimise climate change risks.

This article is republished from The Conversation under Creative Commons license. Read it here.

Australia’s infrastructure crossroads: Can we build better with less?

By Adrian Piani, GHD’s Market Leader for the Australian Federal Government

Adrian Piani is a highly respected engineer and infrastructure leader with over 25 years of experience across the public and private sectors. 

Currently serving as GHD’s Market Leader for the Australian Federal Government, Adrian brings extensive knowledge in strategic infrastructure planning, project delivery, and sustainability. 

We already know what works. We need the resolve to embrace innovation, take smart risks and deliver better outcomes for Australians.

After a decade of record capital infrastructure spending, state and territory governments are grappling with tighter fiscal conditions and higher interest rates. The economic reality is clear: the need for infrastructure will continue to escalate, despite limited funding. The challenge will be in how we continue to invest in and deliver the infrastructure that underpins community wellbeing, with decreased expenditure and increased efficiency. 

The pipeline of planned infrastructure remains extensive, while governments are finding themselves unable to deliver these projects as envisioned due to budget constraints and a culture of risk aversion. However, these challenges present a unique opportunity for us to rethink how we plan, design, and execute infrastructure, while keeping community benefits at the forefront of decision making. 

Fundamentally, infrastructure underpins community welfare and wellbeing, and the backlog of built environment needs will still be there - irrespective of whether funding is available to complete them or not. Infrastructure like roads, hospitals, power grids and telecommunications form the backbone of our modern lives. When you strip away the ability to turn on a light, drive to work, or connect to a mobile network, you quickly understand how infrastructure shapes our happiness, productivity, and wellbeing.

That is why continued infrastructure investment must remain a national priority, even in times of fiscal restraint. Not only does infrastructure enable daily function, but improvements—like hospital upgrades or better road networks—also deliver tangible enhancements to quality of life. Though often taken for granted, the link between infrastructure and community benefit is foundational to our base needs. 

Treasurer Jim Chalmers has flagged productivity as a core focus for the next phase of Australia’s economic agenda. Nowhere is this more relevant than in the infrastructure and construction sectors, which have faced declining productivity for years. 

To maximise public value, we must pursue two parallel strategies. First, prioritise infrastructure investment that focuses on better design to deliver the greatest community benefit with low economic cost. Second, deliver projects more efficiently, by rethinking delivery models, embracing innovation and focusing on effective project management.

Most infrastructure projects today cost more and take longer than expected. Modern infrastructure over the last century has demonstrated that we have sound technical design, but we continue to fall short in effective delivery, a project phase often marked by chaos and ballooning costs. Repeating the same approach and expecting different outcomes is no longer tenable. 

Technologies such as Building Information Modelling (BIM), digital twins, and advanced project data analytics can help streamline design and construction, improve collaboration and reduce errors. Off-site modular construction, where components are created in controlled factory settings also help to improve precision, reduce waste, and speed up delivery. Though these tools and frameworks are readily available and have been in the sector conversation for a decade, they continue to remain underutilised.

As an example, the increasing trend to constructing vertical schools demonstrates a shift towards flexible thinking and in many cases innovative design practice. These multi-level educational facilities can help to address urban density challenges with limited land use. With the right planning and design, full amenity can be delivered within a smaller land footprint, promoting compact design that is cost effective and community focused.

A significant barrier to innovation isn’t technical but rather can be promises on completion dates that do not reflect the time it takes to solve complex challenges through design, and public sector delivery systems that often hinder or even punish creative approaches that are deemed risky and reward safe, conservative repetition. 

An increasingly popular approach for governments is to provide initial funding for preliminary design to support a business case that is reasonably advanced in terms of scope, cost and program. This means decisions on the infrastructure project can be based upon a more mature understanding of legitimate requirements, leading to political promises that are grounded on the reality of project delivery – rather than back of the envelope estimates. 

Private sector firms like GHD have a critical role to play. As specialists who work on infrastructure projects every day, we bring deep technical knowledge, broad international experience that can help unlock bold, creative approaches, together with expertise in project management and business case development. 

Also worth consideration is a maturation of the relationship between government and industry. Collaborative contracting models, early contractor involvement, and shared accountability and risk can be viable options to enable this shift.

Finally, we must recognise that who plans, designs and builds our infrastructure matters. The sector remains male-dominated, and while change is occurring, progress is slow. A broader range of voices leads to better ideas, richer problem-solving and infrastructure that better reflects the communities it serves. Diversity of gender, culture, and experience must be embedded not only in our workforce but also in the way we design, engage and deliver.

Australia’s infrastructure sector is at a crossroads. Fiscal pressures and growing infrastructure needs are key challenges for the sector, but they also present opportunities to embed innovation and centre design around the communities it serves. When we overcome these challenges, we won’t just be building differently, we’ll be building better.

This article has been republished from CEDA under a Creative Commons license. Read the original article here.

"Architecture students today learn about everything except actually building" says Penelope Seidler

By Rupert Bickersteth, digital editor at Dezeen

Rupert is the digital editor at Dezeen. Rupert oversees social media, newsletters, comment moderation, marketing, SEO, web development management and digital engagement at Dezeen – as well as running the Dezeen LIVE reporting from design and architecture festivals around the world, and writing about set design, interiors and architecture projects across art, fashion, restaurants and hotels.

Rupert joined Dezeen in 2022 from the Architects' Journal, where he was latterly the culture editor.
Previously he has worked at magazines including The Architectural Review, TANK and Oyster. He has a degree from the University of Cambridge in history of art.

Architecture students today are being let down by their education, Australian architect Penelope Seidler tells Dezeen in this interview.

"I think young architects are lost," she said. "They want to know what to do, but the teaching seems to be not very particular."

"They're taught all about good things – sustainability, environmentalism, friendly with society, all those things," she added. "They seem to learn everything but actually building."

"The required attributes of an architect are that one should have a good knowledge of building materials first of all, and structural knowledge – you need to learn a lot about how buildings are held up – but I think they should have education about aesthetics."

Penelope Seidler is the director of Sydney-based architecture firm Harry Seidler and Associates, founded by her late husband.

She was speaking to Dezeen at the opening of a major retrospective on Harry Seidler at the San Marco Art Center (SMAC) in Venice, co-organised with the University of Sydney's Chau Chak Wing Museum.

Harry Seidler fled Nazi-ruled Austria as a teenager to eventually become one of Australia's most significant architects. He has been called the father of Australian modernism, particularly known for his work in lightweight concrete.

Today's architecture "very capricious"

Penelope and Harry Seidler married in 1958, and she joined his studio in 1964 after qualifying as an architect.

Speaking about how the profession has changed since Harry Seidler and Associates was founded in 1960, Penelope Seidler – who is also a qualified accountant – said she is "very disappointed in most new buildings".

"Architecturally the problems, in historical terms, were to confront the structural challenges," she said.

"Those problems have been solved – anything is possible and there are no constraints, but visually, I don't think people learn much."

"[Architecture today] is very capricious. You can now build whatever you like wherever you like, but whether it's rational or not, I don't know."

The SMAC exhibition, which is one of two inaugural shows at the gallery following a recent renovation by British architect David Chipperfield, explores Harry Seidler's difficult journey to success.

After fleeing Vienna for Britain in 1938 he was interned by the authorities as an enemy alien and subsequently spent time in internment camps near Liverpool and on the Isle of Man before being shipped to Quebec, Canada.

He was eventually released from internment to study architecture at the University of Manitoba in Winnipeg, and later attended Harvard Graduate School of Design under Walter Gropius and Marcel Breuer.

During school holidays he worked with Alvar Aalto in Boston drawing up plans for the Baker dormitory at the Massachusetts Institute of Technology.

He followed his parents to Sydney, where they had emigrated, initially to design a home for them. The modernist Rose Seidler House was completed in the suburb of Wahroonga in 1950.

Harry Seidler decided to stay in Australia and built more private homes, including working with Penelope on the design of their own house in Killara, Sydney.

He went on to build towers in Sydney and then global projects such as the Australian Embassy in Paris with Breuer and Pier Luigi Nervi.

Nevertheless, Penelope Seidler described her late husband as a "total outsider" in Australia.

"Harry suffered from the fact that he was regarded by many as un-Australian – 'the foreigner'," she said.

Many of his clients were immigrants, she explained, citing Dick Dusseldorp, founder of developer Lendlease, as "the one who could see something in Harry".

Dusseldorp commissioned one of Harry Seidler's most significant projects, the Australia Square Tower.

At the time of its construction in 1967, the Australia Square Tower was the world's tallest lightweight concrete building and introduced the concept of a large public open plaza with prominent artworks to office towers in Australia.

Harry Seidler and Associates would go on to build a number of significant concrete buildings, which – in his words – aimed for "aesthetic dematerialisation", including the Hong Kong Club Building in 1984.

"People say concrete is a bad thing but nonetheless, it's durable," said Penelope Seidler. "We all want to be sustainable and there's a lot spoken about sustainability," she added. "I'm not sure everybody knows exactly what it means."

As well as learning his trade under the direction of Breuer, Gropius and Aalto, Harry Seidler spent several months in 1948 working in Rio de Janeiro with Brazilian architect Oscar Niemeyer.

But even with all these significant 20th century architects shaping his student years, Harry Seidler felt he learned most about aesthetics by studying under the painter Josef Albers at Black Mountain College in North Carolina, according to Penelope Seidler.

Her advice to architecture students today is to study history.

"Study architectural history, and learn from that," she said.

This article has been republished from Dezeen with permission from the author, Rupert Bickersteth. Read original article here.

New business models could help save Australia from its housing crisis

By Kebir M. Jemal, University of Melbourne

Australia has experienced a dramatic rise in housing prices over the past decade. Data from the Australian Institute of Health and Welfare shows that by the end of 2023, median house prices across major cities have risen substantially, with prices in Sydney soaring to a staggering $AU1.3 million.

Canberra, Melbourne and Brisbane followed closely. Those median prices sit at $AU980,000, $AU840,000 and $AU830,000 respectively.

Compared to other countries, home ownership is becoming increasingly out of reach for many Australians – we now lag behind countries like the US and the UK.

And other housing affordability metrics in Australia continue to paint this grim picture.

The house price-to-income ratio now averages at 16.4 times the per capita income, nearly double what it was in 1990, and significantly higher than in 2020.

Affordability for median-income households reflects a similar trend, with only 10 per cent of the housing market now affordable to them, down from 40 per cent in March 2022.

Another key indicator we use to look at affordability shows the number of years to save a 20 per cent deposit now exceeds 13 years in Sydney, followed by 11.8 years in Hobart and 10.9 years in Brisbane.

Additionally, the percentage of household income required to service a new mortgage has also risen across major Australian cities; we’ve got 62.1 per cent in Sydney, and 51.7 per cent in Brisbane, which has doubled since 2019.

All of these metrics tell us just how much Australia’s housing affordability has deteriorated over the past few decades.

But before we explore possible solutions, we need to first understand the root causes.

The mismatch of supply and demand

The housing issue is shaped by a complex blend of factors, including rising demand, changing household incomes, shifting demographics and taxation policies.

One key driver is the mismatch between supply and demand, particularly in rapidly growing urban centres.

With almost half of Australia’s population now living in major cities, economists point to a shortage of available urban homes along with the increasing inability of many Australians to keep up with soaring rent and property prices.  

In response, governments at all levels have committed to increasing the housing supply by 1.2 million new homes by 2029, an ambitious target that requires a 40 per cent increase in annual housing delivery over the next five years.

Despite this promise, there are growing concerns about whether this target is really attainable, particularly with the current approaches to housing construction.

Many housing experts warn that new supply is likely to fall short, citing the limited involvement of local governments in national decision-making as a major barrier.  

In the current Australian housing discussion, the opportunities presented by new business models are largely missing.

For example, some approaches could be inspired by servitisation – where instead of selling the land itself, governments or developers sell land as a service, packaging access with maintenance and infrastructure, perhaps on a lease.

If combined with prefabrication, a smart building method that enables faster, cost-effective construction, it could transform the housing market and help meet the ambitious housing targets.

But how can they be applied in Australia?

Rethinking the way we ‘own’

Servitisation models present a new way of thinking about ownership by shifting the focus from ownership to access.

If we think about the concept in terms of housing, this could enable local councils to respond to urgent housing demands by leasing undeveloped land temporarily.

In particular, this approach can help rapidly deploy temporary homes in response to disaster relief and low-income housing.  Ideas like peppercorn rent schemes –  where land is leased for a nominal fee – mean councils could temporarily meet housing demands.

Land value plays a direct role in housing affordability, with higher costs associated with land often driving up housing prices and impacting people’s ability to afford homes.

Servitisation can help by distributing land costs over a certain period, drastically improving the affordability of social housing schemes, and potentially eliminating the high capital expenditure associated with land.

Combined with prefabrication, servitisation could offer a holistic housing solution that integrates design, fabrication, installation and disassembly, as well as the possibility of bundling building services into the service offering.

Rethinking the way we ‘build’

Prefabrication, also called modular or off-site construction, is a mode of production where building components are manufactured away from the construction site.

By manufacturing standardised and modular components in a controlled environment, this approach offers a faster, cheaper and efficient way to build. These parts are then transported to the building site and assembled like pieces of a puzzle.

Despite its long history in Australia, its adoption in the construction industry has remained limited.

Currently, prefabrication represents less than five per cent of Australia’s $AU150 billion construction industry. Although it’s estimated to reach 15 per cent by the end of this year, we’re still well behind other developed countries like Finland, Norway and Sweden.

In its modern form, prefabrication is a part of a broader, innovative business model known as industrialised building, which combines prefabrication, modularisation and standardisation.

Collectively, this business model promises a range of benefits, including improved productivity, reduced construction waste and significant time and cost savings.

Technology plays a crucial role, supporting every stage of the process from design to production and on-site assembly. By reducing lead time and increasing productivity, these technologies can help drive down costs.

A range of technological enablers, collectively referred to as Industry 4.0 technologies, include sensors, data analytics, robotics, artificial intelligence, additive manufacturing and augmented/virtual reality, contribute to its evolution.

The true cost-saving potential of prefab housing is realised when implemented at scale, enabling economies to drive down cost and improve affordability

With supply bottlenecks and unmet demand, prefabricated houses can potentially boost housing supply in a short timeframe.

Bringing new business models into the housing dialogue

New business models like servitisation and prefabrication hold great promise in addressing Australia’s complex housing challenges.

But current affordable housing discourse tends to focus on government policies, taxation, rising costs and inadequate supply.

While these factors are important, we need to broaden the conversation to include new business models that tap into unique solutions.

At the core of the housing issue is a mismatch between supply and demand, an issue that servitisation and prefabrication are well-positioned to help resolve by offering a whole housing solution on a service basis.

This article was written with the insights of industry professionals, with special thanks to Damien Crough from prefabAUS.

This article is republished from the Pursuit under Creative Commons license. Read the article here.

What is a ‘smart city’ and why should we care? It’s not just a buzzword

Milad Haghani, Associate Professor & Principal Fellow in Urban Risk & Resilience, The University of Melbourne and Abbas Rajabifard, Professor in Geomatics and SDI, The University of Melbourne and Benny Chen, Senior Research Fellow, Infrastructure Engineering, The University of Melbourne

More than half of the world’s population currently lives in cities and this share is expected to rise to nearly 70% by 2050.

It’s no wonder “smart cities” have become a buzzword in urban planning, politics and tech circles, and even media.

The phrase conjures images of self-driving buses, traffic lights controlled by artificial intelligence (AI) and buildings that manage their own energy use.

But for all the attention the term receives, it’s not clear what actually makes a city smart. Is it about the number of sensors installed? The speed of the internet? The presence of a digital dashboard at the town hall?

Governments regularly speak of future-ready cities and the promise of “digital transformation”. But when the term “smart city” is used in policy documents or on the campaign trail, it often lacks clarity.

Over the past two decades, governments around the world have poured billions into smart city initiatives, often with more ambition than clarity. The result has been a patchwork of projects: some genuinely transformative, others flashy but shallow.

So, what does it really mean for a city to be smart? And how can technology solve real urban problems, not just create new ones?

What is a smart city, then?

The term “smart city” has been applied to a wide range of urban technologies and initiatives – from traffic sensors and smart meters to autonomous vehicles and energy-efficient building systems.

But a consistent, working definition remains elusive.

In academic and policy circles, one widely accepted view is that a smart city is one where technology is used to enhance key urban outcomes: liveability, sustainability, social equity and, ultimately, people’s quality of life.

What matters here is whether the application of technology leads to measurable improvements in the way people live, move and interact with the city around them.

By that standard, many “smart city” initiatives fall short, not because the tools don’t exist, but because the focus is often on visibility and symbolic infrastructure rather than impact.

This could be features like high-tech digital kiosks in public spaces that are visibly modern and offer some use and value, but do little to address core urban challenges.

The reality of urban governance – messy, decentralised, often constrained – is a long way from the seamless dashboards and simulations often promised in promotional material.

But there is a way to help join together the various aspects of city living, with the help of “digital twins”.

Smart city and communication network concept. 5G. LPWA (Low Power Wide Area). Wireless communication. / University of Bath

Digital twin (of?) cities

Much of the early focus on smart cities revolved around individual technologies: installing sensors, launching apps or creating control centres. But these tools often worked in isolation and offered limited insight into how the city functioned as a whole.

City digital twins represent a shift in approach.

Instead of layering technology onto existing systems, a city digital twin creates a virtual replica of those systems. It links real-time data across transport, energy, infrastructure and the environment. It’s a kind of living, evolving model of the city that changes as the real city changes.

This enables planners and policymakers to test decisions before making them. They can simulate the impact of a new road, assess the risk of flooding in a changing climate or compare the outcomes of different zoning options.

Used in this way, digital twins support decisions that are better informed, more responsive, and more in tune with how cities actually work.

Not all digital twins operate at the same level. Some offer little more than 3D visualisations, while others bring in real-time data and support complex scenario testing.

The most advanced ones don’t just simulate the city, but interact with it.

Where it’s working

To manage urban change, some cities are already using digital twins to support long-term planning and day-to-day decision-making – and not just as add-ons.

In Singapore, the Virtual Singapore project is one of the most advanced city-scale digital twins in the world.

It integrates high-resolution 3D models of Singapore with real-time and historical data from across the city. The platform has been used by government agencies to model energy consumption, assess climate and air flow impacts of new buildings, manage underground infrastructure, and explore zoning options based on risks like flooding in a highly constrained urban environment.

In Helsinki, the Kalasatama digital twin has been used to evaluate solar energy potential, conduct wind simulations and plan building orientations. It has also been integrated into public engagement processes: the OpenCities Planner platform lets residents explore proposed developments and offer feedback before construction begins.

Urban planners in Helsinki have been using a digital twin to help plan building orientations. / Ninara

We need a smarter conversation about smart cities

If smart cities are going to matter, they must do more than sound and look good. They need to solve real problems, improve people’s lives and protect the privacy and integrity of the data they collect.

That includes being built with strong safeguards against cyber threats. A connected city should not be a more vulnerable city.

The term smart city has always been slippery – more aspiration than definition. That ambiguity makes it hard to measure whether, or how, a city becomes smart. But one thing is clear: being smart doesn’t mean flooding citizens with apps and screens, or wrapping public life in flashy tech.

The smartest cities might not even feel digital on the surface. They would work quietly in the background, gather only the data they need, coordinate it well and use it to make citizens’ life safer, fairer and more efficient.

This article is republished from the Grattan Institute under Creative Commons license. Read it here.

Size Matters: Why construction productivity is so weak

By Melissa Wilson, Senior Economist CEDA and James Brooks, Economist Ceda

Introduction

The construction sector is one of our largest industries and is vital to the functioning of our economy. It plays a critical role in meeting Australians’ housing needs, delivering the infrastructure pipeline and making the energy transition. These goals are important not only for Australians today, but also for generations to come. Our economic prosperity relies on our ability to get things built, but we are losing this ability. Without improvement in this sector we will not be able to deliver on a strong economy and a strong social compact.

Report highlights

Put simply, productivity means producing more of something (an output) with the same or fewer resources (inputs). It is about working smarter, not harder.

Labour productivity in construction (measured as output per hour worked) grew by just 17 per cent over the 29 years from 1994/95 to 2023/24. In contrast, labour productivity grew by 64 per cent in the ‘market-sector’ industries, and 58 per cent in manufacturing over the same period.

Multifactor productivity in construction has been broadly unchanged from 1994/95 to 2023/24. It grew by almost 20 per cent in market sector industries and 23 per cent in manufacturing over the same period.

Productivity has been particularly weak in the building of houses and apartments. Our analysis shows that dwellings built per construction worker have declined by roughly 50 per cent since the 1970s (Figure 3).

These measures do not account for changes in the size and quality of buildings, which have both improved over time. The Productivity Commission has found that, even when adjusting for size and quality improvements, construction labour productivity per hour worked has declined by around 12 per cent since 1994, and still significantly underperformed the wider economy, which experienced labour productivity growth of around 49 per cent over the same period. 

Construction’s productivity performance has been one of the weakest of all sectors in the economy – it is one of only three market-sector industries to have subtracted from overall multifactor productivity growth in recent decades. Boosting productivity in construction will be vital to solving Australia’s housing crisis, rejuvenating weak business investment and supporting a strong economy.

Construction is now dominated by small firms

Construction is one of the least concentrated industries in Australia, made up mainly of small firms and individual subcontractors. Aside from the few very large or highly specialised firms, the number of firms in the industry is far greater than what is needed to deliver effective competition. Our analysis shows this is contributing to the productivity problem.

There are currently 410,602 construction firms in Australia, of which 98.5 per cent are small businesses with fewer than 20 employees. Ninety-one per cent of construction firms are microbusinesses with fewer than five employees, up significantly from 43 per cent in 1988/89. Construction has a much higher share of microbusinesses than comparable industries.

In Australia, firms with fewer than 20 employees account for 53 per cent of total construction sector revenue. Many of these small firms are “construction services” providers, which includes a diverse network of tradespeople and subcontractors. Their large share of construction revenue and employment, and high degree of interconnectedness with the rest of the sector, means that small construction firms are critical to the sector’s overall productivity.

Smaller construction firms are less productive

We analysed previously unreleased ABS data that looked at revenue per employee in construction firms ranging in size from zero to 200+ employees. While we are unable to measure firm-level productivity, revenue per employee acts as a reasonable proxy for labour productivity.

We found that Australian construction firms with 200 or more employees generate 86 per cent more revenue per worker than Australian construction firms with 5 to 19 employees (Figure 5). 

If firms in the Australian construction industry matched the size distribution of firms in the manufacturing industry, the construction industry would produce 12 per cent, or $54 billion, more revenue per year without requiring any additional labour. This is equivalent to gaining an extra 150,000 construction workers. In a sector currently suffering from labour shortages that are holding back progress, this sort of increase

would make substantial inroads in the ability to deliver on critical infrastructure and housing works.

Smaller firms are less able to achieve economies of scale and scope. Consultation with CEDA members and other industry experts has confirmed that the construction industry tends to be fragmented, insular and lacking incentives to adopt new ways of doing things.

WHY ARE THERE SO MANY SMALL CONSTRUCTION FIRMS?

Construction firms have stayed small because the structure of the industry and regulations encourage them to remain so.

Construction is highly segmented and demand is highly cyclical. Downturns in demand can disadvantage businesses that invest in productivity-enhancing assets like machinery, equipment and new technologies. They are therefore more likely to maintain cost flexibility by relying on labour instead of capital inputs, and to favour subcontracting as a more flexible source of labour than direct employment. 

As subcontracting fragments the industry, this has likely increased the time and effort spent on procurement, contract negotiations, supervision and regulation, and dispute resolution. Our consultation has identified reworks and disputes as a major source of inefficiency in the sector.

TAX SETTINGS AND REGULATIONS KEEP FIRMS SMALL

Tax incentives encourage construction firms to remain small

Being self-employed can result in paying less tax than a salaried employee earning the same pre-tax income. Self-employed businesses typically operate as a private company or sole trader.

Our analysis of HILDA income data for people working at least 30 hours per week shows around 8.5 per cent of independent contractors in the construction sector disclose income under the tax-free threshold of $18,200, and therefore pay no tax, compared with just 2 per cent of salaried construction workers (Figure 7). 2.2 per cent of the contractors disclose no income at all, compared with 0.44 per cent of salaried workers.

Self-employed businesses operating as sole traders are taxed at the same marginal tax rates as employees. However, independent contractors must declare and assess their own tax obligations. Self-employed people are more responsive to changes in tax rates and are more likely to report their income just under thresholds where marginal tax rates increase, often called “bunching”.

These results are not unexpected given the structure of our taxation system. Employees or salaried workers typically make ongoing personal income tax contributions deducted from each salary payment with rising thresholds based on income. In contrast, private companies are taxed at a flat rate of 25 per cent for small and medium businesses (with revenue of less than $50 million) and 30 per cent for larger businesses.

Other tax settings also favour smaller construction firms. For example, the instant asset write-off currently allows businesses with turnover of less than $10 million to claim an immediate tax deduction on vehicles and other business assets. There are therefore significant incentives for construction workers to be self-employed under a private company arrangement to minimise their tax bill.

It’s not just individual tax settings that are discouraging scale. Taxes charged at different rates based on firm size can also discourage productive firms from growing, particularly payroll tax.

Australia’s land-use regulation is complex and decentralised

Australia has a complex combination of local, state and federal rules around land-use that often differ across local geographic areas. Australia has the most decentralised system of land-use planning in the OECD.

For example, the development application to build a three-storey block of apartments in Sydney in 1967 was 12 pages long. Today an equivalent building would require extensive structural, environmental, traffic and often heritage assessment, meaning applications are many hundreds if not thousands of pages long.

This can prevent new firms from entering the local market and prevent productive firms from growing. Where there is more regulation or it adds greater uncertainty to large housing projects, firms are more likely to prefer smaller projects that are better suited to smaller, less productive firms. This exacerbates geographic segmentation, makes it harder for firms to grow and reduces the incentive to invest in technology. 

This area is ripe for reform. Our consultations revealed broad agreement that land-use regulation is a barrier to firm size in Australia.

In New Zealand, the Auckland Unitary Plan removed many different zoning restrictions, allowing for higher-density development across the city. The “up-zoning” of Auckland started in 2013 with the introduction of “Special Housing Areas”. It was implemented across three-quarters of Auckland in 2016, and more than tripled approvals for dwellings within six years. It coincided with a significant increase in multifactor productivity in NZ construction.

Other regulations

Other regulations may also be holding back firm size and productivity. This includes state-based occupational licensing, which sets legal requirements to practice an occupation such as being a plumber, painter or electrician. Construction licensing has become more stringent in recent years, which can be detrimental to productivity growth because it makes businesses less dynamic, reduces business entries and exits, and makes it harder for the most productive businesses to grow. The Federal Government’s new plan to introduce national licensing for electricians is a much-needed first step in the right direction.

CONCLUSION AND POLICY DIRECTION

Productivity in the construction industry has been stagnant for three decades. While many factors have contributed to this outcome, a critical driver is the dominance of small firms. Currently, 98.5 per cent of Australian construction firms have fewer than 20 employees. Smaller building companies are less productive than bigger firms because they can't achieve the same productivity gains from economies of scale and scope, innovation and investment.

Our analysis of previously unreleased ABS data shows Australian construction firms with 200 or more employees generate 86 per cent more revenue than those with 5 to 19 employees. If Australian construction firms matched the size distribution of firms in the manufacturing industry, construction would produce 12 per cent, or $54 billion, more revenue per year without requiring any additional labour. This is equivalent to gaining an extra 150,000 construction workers. The dominance of small firms is the result of the cyclical and segmented nature of the industry, combined with the shift to subcontracting that took place in the early 1980s and late 1990s.

Current regulatory settings are keeping builders small:

1. Tax incentives favour independent contractors, who are four times more likely to disclose income under the tax-free threshold than salaried construction workers. Other tax settings, such as the instant asset write-off and payroll tax thresholds, also favour smaller construction firms.

2. Australia has the most decentralised system of land-use regulation in the OECD, which exacerbates geographic segmentation and makes it harder for firms to expand into new areas.

3. Complex, and in some cases increasingly stringent, state-based occupational licensing rules also make it harder for the most productive businesses to expand interstate.

To encourage scale, governments should:

1. Make local and state government regulations more streamlined and consistent.

2. Help to smooth out variability in demand by creating a more consistent, predictable pipeline of construction work through their infrastructure and social housing programs.

3. Better align the relative tax rates for individuals and small and large businesses as part of broader reform of the entire tax system.

Australia has been slow to deliver on critical infrastructure projects and has not built enough homes to keep up with demand. Sydney is now the second most expensive housing market in the world, while Melbourne is seventh and Adelaide ninth.

To help us build smarter, not just harder, we must focus on policies to lift productivity in construction.

This article has been republished from CEDA under Creative Commons license. Read it here.

Victoria’s Property Tax Burden: A Call for Reform in the 2025 State Budget

By Richard Temlett, National Executive Director of Research at Charter Keck Cramer

Richard Temlett is the National Executive Director of Research at Charter Keck Cramer and has become one of Australia’s leading housing market experts and thought leaders on the residential housing market across Australia. Richard believes that property development decisions need to be made using data and an evidence base. He specialises in providing forward looking, evidence-based research and insights that help inform developer and financier strategic property development decisions.

The Victorian Government released the 2025 State Budget this week.

Since 2014 there have been 29 new or increased taxes that specifically relate to the property sector in Victoria. These taxes have distorted the market, impacted purchasing and investment decisions, impeded productivity and more recently deterred investment into Victoria.
The table below shows that Victoria is now the highest taxed State when it comes to property taxes in Australia.

Source: 2024-2025 State Budget Papers, State Revenue Office Victoria, Revenue NSW, Qld Revenue Office, WA Government, Revenue SA, State Revenue Office Tasmania, ACT Revenue Office, Territory Office ABS, Charter Keck Cramer.

A deeper dive into the tax revenue raised by the Victorian State Government shows that 46% of it comes from taxes on the property industry. This is much higher than some of our neighbouring states (NSW is 44% whilst QLD is 37%).

What is particularly concerning is the level of debt that the State has also accumulated since the pandemic. I am constantly hearing from investors that they are attracted to Victoria but are not investing because of the higher taxes and charges and now the greater levels of sovereign risk when compared to other States and Territories.

The Victorian Government is advised to carefully consider its next steps. The “new” housing market has all but collapsed since late 2024 and will take time and Government support at all levels to recover.

Many of the tax policies and changes implemented by the State Government to date have been reactive and regressive. They appear to be based on the assumption that property prices will keep rising and that developers and investors can afford these taxes.

A more proactive and progressive way to address this crisis would be to decrease several of these taxes and charges, reduce red tape, streamline regulations and create more business and investment-friendly settings in a concerted effort to grow the economy. This will encourage innovation, investment & business expansion and will boost productivity and ultimately grow GDP. This in turn will increase Government revenues and reduce the budget deficit in a much more sustainable way without placing unnecessary and unfair financial strain on businesses and individuals.

Melbourne was once the most liveable City in the world. It is possible for the City to regain this mantle, but it starts with the Government taking a progressive longer-term vision with a focus on creating a sustainable path to fiscal stability rather than the current regressive and reactive approach to revenue raising.

This article was republished with the permission of Charter Keck Cramer. Read the original article here.

Victoria’s planning reforms could help solve the housing crisis. But they are under threat

By Brendan Coates, Program Director, Housing and Economic Security, Grattan Institute

Joey Moloney, Deputy Program Director, Housing and Economic Security, Grattan Institute

Matthew Bowes, Associate, Housing and Economic Security, Grattan Institute

Photo by Geometric Photography

The federal election campaign was dominated by the housing crisis. But the real power to solve it rests with the states.

In Victoria, reforms are underway that promise a bigger boost to the housing aspirations of younger generations than anything that occurs in the federal parliament.

Yet these reforms are now under threat of being killed off in the Victorian parliament. If that happens, Victoria will have fewer homes and they will be more expensive, and many more younger Melburnians will be locked out of home ownership.

We need to build more homes

At the heart of our housing problem is the fact we just haven’t built enough homes.

Australia has among the least housing stock per person in the developed world. This is especially true in places where people most want to live: close to jobs, transport, schools and parks.

The reason is simple: we’ve made it hard to build more townhouses and apartments in the most desirable parts of our biggest cities.

Like in other states, Victorian state and local governments have long restricted medium- and high-density developments to appease local opposition. The Neighbourhood Residential Zone – the most restrictive residential zone in Victoria – covers more than 42% of residential land within ten kilometres of the Melbourne CBD.

And the politics of land-use planning – what gets built and where – favour those who oppose change. The people who might live in new housing in established suburbs – if it were to be built – don’t get a say.

The result is a vast “missing middle”: prime inner-city land, close to jobs and transport, with housing rising only one or two storeys. Melbourne, like Sydney, is one of the least-dense cities of its size in the world, despite the city’s population having risen by 875,000 in the past decade alone. That is the equivalent of almost two Canberras.

It’s a myth that most Victorians want a quarter-acre block if that means living a long way from jobs, transport, shops and parks. Research by both Grattan Institute and Infrastructure Victoria shows there is substantial demand for townhouses and apartments in established suburbs, if only we built more of them.

If Melbourne’s middle suburbs – those between two and 20 kilometres from the CBD – were as dense as those of Toronto, that increase in density alone could accommodate all of the 800,000 extra homes the state government plans to build over the next decade.

The flow-on effect is high prices and rents, a stagnating economy because fewer people can live close to jobs, and further expensive and environmentally damaging sprawl into farmland and floodplains.

Recent research showed that 8,000 completed apartments in Melbourne remain unsold. Yet this is less than 3% of all apartments in Melbourne, and is unsurprising given past sharp rises in interest rates and increased barriers in selling to foreign buyers.

That some newly built homes have taken longer to sell is not a reason to prevent the building of those extra homes that so many future Melburnians want to live in.

Victoria’s planning reforms are our best chance

Housing can become more affordable if we allow more homes to be built where residents most want to live.

The Victorian government’s recent reforms, like those in NSW, do just this. Its “activity centre” program will allow more apartments around 60 rail stations and other transport hubs.

Victoria’s new Townhouse and Low-Rise Code will streamline development approval processes for developments of three storeys or less in residential zones across the state. Where developments meet the code, those new homes will no longer need a planning permit and will be exempt from third-party appeals. This is already the case for knock-down rebuilds.

These reforms have the potential to unlock hundreds of thousands of extra homes in the coming decades in areas with some of the best infrastructure, amenities and public spaces.

Similar reforms in Auckland, starting in 2016, contributed to a home building boom that reduced rents by at least 14%. Most of this new stock was townhouses and small apartment buildings, rather than high rises.

Urban density, if done well, can add to neighbourhood amenity while preserving local green space. Several cities with similar populations but higher densities – such as Toronto and Berlin – match or outrank Melbourne on quality-of-life measures.

These reforms are now under threat

These changes do not dictate where housing must be built in Melbourne: they simply permit more housing where demand is highest.

Yet these reforms are now under threat. The Victorian Liberals and the Greens have teamed up to launch an inquiry into the state Labor government’s reforms. The inquiry is scheduled to report on Tuesday, just one day before the deadline for disallowing the reforms lapses.

Together, the Liberals and the Greens have the power to revoke the changes in the upper house of the Victorian parliament. That would be a disaster for housing affordability in Victoria.

The Victorian parliament shouldn’t stand in the way of young families who want to buy a townhouse in the suburb they grew up in, or seniors downsizing to an apartment in their local neighbourhood.

These reforms are about allowing more homes, and creating a better, healthier, and more vibrant Melbourne.

This article is republished from The Conversation under Creative Commons license. Read it here.

Modernising construction: Can we fix Australia’s enduring housing crisis? Yes, we can

By Laura Gutierrez Bucheli Research Fellow, Department of Architecture, Monash University, Duncan Maxwell, Associate Professor, Department of Architecture, Monash University and Rachel Couper, Lecturer, Department of Architecture, Monash University

Despite political promises and public outcry, Australia continues to significantly underperform on its housing targets, currently lagging a staggering 50% behind what is required.

The critical question remains: What is holding us back?

The current election debates in Australia highlight a concerning imbalance in proposed housing policies.

While both major parties focus on demand-side interventions – Labor’s reduced minimum deposit and the Coalition’s mortgage repayment tax deductibility for first home buyers – a much-needed supply-side response is missing.

Labor’s commitment of $10 billion to build 100,000 new homes for first home buyers, coupled with plans to leverage underused government land and streamline development approvals, represents a direct attempt to address the supply shortage. As does its recently announced offer to state governments of $2b in concessional loans over four years to boost housing supply.

However, the experience of the existing Housing Australia Future Fund, established to boost social and affordable housing, reveals the challenges in translating policy into tangible construction outcomes. The fund has faced delays in finalising contracts and commencing construction, highlighting a broader weakness in effectively tackling the fundamental issue of housing supply.

The urgent need for productivity gains in housing

In a direct response to this pressing issue, the Albanese government established the National Housing Accord (Accord) in October 2022. This initiative pledged to facilitate the construction of one million new, well-located dwellings over five years, commencing in 2024.

This commitment explicitly acknowledged the government’s role in boosting the housing supply, subsequently evolving into a more ambitious target of 1.2 million homes by June 2029 – a goal necessitating a quarterly completion rate of approximately 60,000 dwellings.

Alarmingly, the current national construction completion rate – 44,884 homes nationwide in the September 2024 quarter – is demonstrably falling short of the required trajectory.

A significant factor hindering progress is the absence of productivity gains in housing construction.

A recent study by the Productivity Commission revealed that the amount of value workers create each hour has actually gone down by 12% over the past three decades in housing construction. This is surprising because, at the same time, the average worker in Australia is now much more productive (by 49%). This lag in productivity is significantly impacted by escalating construction costs, which have risen by 35% in the past five years.

This productivity challenge shows the urgent need for innovative approaches to building homes more efficiently, utilising resources effectively, and ultimately delivering more dwellings to meet the growing demand.

Our research reveals that historic efforts to address the construction productivity crisis have predominantly centred on improving on-site activities. However, it is well known that making changes during the construction phase is significantly more expensive and offers less flexibility for impactful adjustments.

Our research indicates that project success is heavily influenced by adopting a holistic perspective that prioritises the early stages of design and engineering, where modifications are more cost-effective and easier to implement.

Our research project has also found that leveraging this holistic approach is achievable through the adoption of Modern Methods of Construction (MMC). MMC involves the off-site fabrication of building components in controlled factory environments, followed by on-site assembly.

This process-focused approach significantly reduces reliance on large on-site workforces and enhances project predictability. The utilisation of prefabricated elements and modular construction has the potential to dramatically decrease construction time and resource consumption while simultaneously minimising waste and promoting environmental sustainability – benefits that directly translate to improved sector productivity.

Despite growing awareness of MMC’s potential among government and professional bodies, its widespread implementation will only be realised through substantial structural changes throughout the industry, requiring decisive and coordinated action from both federal and state levels.

Our research reveals that the pursuit of MMC can and will drive productivity improvement, but must be pursued from a holistic industry perspective across product and process rather than simply moving construction offsite.

Such an approach requires a range of interventions that our research has defined and is exploring, namely — a renewed and upskilled workforce that focuses on the integration of design and production, pursues innovation and invests in research, and is underpinned by new business/financial models, within a reformed regulatory context.

Future-focused workforce: Cultivating a modern trades force

International experience confirms that MMC demands a distinct skillset compared to traditional building trades. For white-collar professionals, training programs need to evolve to emphasise digital skills, logistics management, and crucially, design optimisation for efficient off-site production and seamless onsite assembly.

Conversely, blue-collar training should focus on upskilling towards multi-skilled operators proficient in off-site manufacturing processes, alongside enhanced softer skills such as communication, collaboration, and problem-solving.

Cultivating a modern trades workforce involves establishing new roles and clear career pathways within manufacturing facilities, which can attract a more diverse talent pool to the construction sector.

To facilitate this transition, the Vocational Education and Training (VET) sector must proactively adapt its curriculum to meet this evolving demand. This includes a critical update of National Training Packages to incorporate MMC-specific competencies and the creation of multi-credential pathways to foster both awareness and advanced upskilling in MMC methods.

Design for manufacturing and assembly: A new design ethos

Successful MMC adoption hinges on meticulous early planning, including a firm design freeze and strong supply chain coordination, highlighting the crucial role of design. However, fully leveraging MMC also requires a shift in design philosophy towards Design for Manufacture and Assembly (DfMA). This involves actively utilising standardised components and a ‘kit of parts’ approach—akin to how other industries have developed product platforms—facilitated by increased familiarity with available MMC products and potentially a centralised database of such resources.

This entails a transition from predominantly bespoke, site-specific designs towards solutions intentionally conceived and optimised for off-site fabrication and streamlined on-site assembly, and points towards a renewed white-collar workforce and skills base

Empowering small businesses through research and innovation

The distributed and fragmented nature of the Australian construction industry, dominated by numerous small companies, presents a unique challenge for Research & Innovation (R&I) investment.

Contrary to the perception of a sector led by large corporations, the vast majority of construction entities are micro-businesses with limited capacity for strategic future planning and the implementation of significant operational changes. Targeted funding for R&I initiatives specifically aimed at these smaller players is essential.

Our research demonstrates that documenting and disseminating real-world case studies showcasing successful transitions to MMC, particularly those leveraging prototyping for design refinement, testing, and communication, can serve as invaluable knowledge-sharing resources and provide practical lessons learned for small construction companies.

Regulation: Adapting to new ways of building

Existing regulations and contractual frameworks may also present barriers to the widespread adoption of MMC. Risk allocation in new types of contracts, particularly those involving collaboration between manufacturers and main contractors, material procurement, transportation, and on-site storage, needs careful reconsideration to reflect the unique characteristics of MMC projects.

A collaborative approach between industry and government is necessary to identify and address regulatory hurdles and ensure a smooth transition towards modern construction practices.

Financial models: A mismatch with modern construction

A key structural barrier hindering MMC adoption lies within current financial models. Traditional banking practices for development projects typically release funds in stages tied to conventional on-site construction milestones.

This established framework often clashes with the different payment schedules and the need for upfront investment characteristic of off-site manufacturing and construction. Adapting financial instruments to accommodate the unique cash flow requirements of MMC projects is crucial to unlocking their potential.

While the echoes of the 2022 housing crisis remain frustratingly familiar, our research offers a potent recipe for a different future.

By tackling the systemic barriers we've identified – a traditionally skilled but not future-fit workforce, a design ethos rooted in bespoke on-site builds, under-resourced R&I for small businesses, misaligned regulations, and outdated financial models – Australia can finally forge a tangible pathway forward towards supply-side solutions.

Our ongoing research will pursue practical implementation strategies for MMC. This includes designing a purpose-driven VET qualification system tailored for MMC, developing automated tools for streamlining coordination across all project stages, creating accessible R&I frameworks for SMEs through documented case studies and interactive prototyping, and proposing concrete regulatory reforms that actively facilitate off-site construction.

The time for incremental change has passed; a bold, modern approach is essential to finally turn the tide on the nation’s enduring housing crisis.

This article is republished from the Monash Lens under Creative Commons license. Read the original article here.

The uncomfortable question at the heart of housing policy

By Eliza Owen, Head of Research at CoreLogic Australia

Eliza Owen was appointed the Head of Research at CoreLogic Australia in 2020.

She has spent almost a decade as a housing market researcher, reporting extensively on key issues including housing affordability, credit conditions and the impact of the COVID-19 pandemic on housing market performance.

In addition to her role at CoreLogic, Eliza is passionate about sharing her knowledge with broader consumer audiences, and serves as a state advisory council member for NSW/ACT with CEDA. Eliza is also a popular keynote speaker, having presented to thousands in real estate, construction, banking and finance and property development, as well as consumer audiences.

In today's Pulse,  Eliza Owen analyses an uncomfortable question at the heart of the housing policy debate - should home values come down?

Housing has become one of the defining issues of the 2025 Federal Election. As affordability worsens and rental markets remain tight, the question of how to support Australians into secure, affordable housing has rightly become central to both major parties’ campaigns.

Both major parties have released policies aimed at improving access to home ownership, particularly for first-home buyers. Economists and industry experts have expressed concern that many of these proposals target demand in a market already constrained by limited supply. Without corresponding efforts to increase supply, such measures risk placing further upward pressure on already elevated home values, the very dynamic driving the need for intervention in the first place.

Housing is an essential service and Australia’s largest asset class, so any policy shift must weigh the benefits to buyers against the long-term consequences for financial stability, household debt, and household wealth. Essentially, there’s one uncomfortable question underpinning the debate:

Should home values come down?

For many existing homeowners, values do not need to continually rise to deliver strong capital gains. CoreLogic’s quarterly resale data reinforces this. Even if national home values were to fall by 10%, most homeowners would remain in a strong equity position. In the December 2024 quarter, 95.7% of residential resales achieved a nominal profit. If resale values were reduced by 10%, 88.5% of vendors would still have recorded a gain, with the median profit sitting at $263,000. On the flip side, a 10% fall in national home values would rewind the market back to May 2023 levels. The median value to income ratio, which was 8 at the end of last year, would go down to 7.2, and a 20% deposit on the median dwelling value in March 2025 would fall by about $16,000 (from $164,000 to $148,000).

One of the greater financial risks of falling home values recently cited in the lead up to the election is negative equity, which is where home values fall to be less than the value of outstanding mortgage debt. The RBA estimates less than 1% of mortgaged households are in negative equity, and this is in part due to high home values. But, as noted in their latest financial stability review, “even when faced with a severe 30 per cent decline in housing prices, around 9 in 10 mortgagors would still have positive equity”.

Besides this, negative equity is only really a danger when buyers fall behind on their mortgage and need to recoup their debt through the sale of the home. The 2021 census revealed 31% of households owned their home without a mortgage, meaning no risk of negative equity from falling home values. For mortgaged households, around 40% of owner-occupier mortgage holders on variable interest rates are at least two years ahead on mortgage payments, so negative equity should not pose much of an issue to these households, or the broader financial system. Even for recent buyers who have not built up a buffer on their mortgage payments, APRA data shows around 70% of home loans were originated with a deposit of at least 20%, meaning the value of a home would need to fall more than 20% from the purchase value before the buyer was in negative equity.

Western Australia offers a useful case study of the impact to financial stability when between 2014 and 2019, home values fell by 16.1%. This was due to a slowdown in mining investment and weakening iron ore demand, which in turn led to population and economic decline. By mid-2020, nearly 44% of home resales in Perth were made at a nominal loss. Yet despite this prolonged downturn, mortgage arrears remained below 2%, and the financial system remained stable. First home buyers benefitted as the value to income ratio across Perth dwellings fell from 6.6 to 4.8 between June 2014 and June 2019.  This highlights how price corrections can occur without triggering widespread financial distress, provided lending standards remain strong and borrowers are well-positioned.

It is important to stress that the financial position of most mortgaged households has been stable over time because mortgages are traditionally lent with strong buffers, be it a 20% deposit or a serviceability assessment buffer on interest rates (which has been three percentage points on top of the product rate since late 2021). Some of the policy proposals floated ahead of the election, such as expanding low home loan deposit schemes or reducing the serviceability assessment buffer, may pose more risk to financial stability unless housing values do in fact continue to rise.

Reframing the Conversation

A fall in values need not be viewed as a negative for the Australian economy. Housing is not only an investment, but also something people consume. If housing costs were lower relative to income, Australians could redirect more spending to health, education, and technology, potentially even increasing earning potential as a result. Put another way, it wouldn’t be the end of the world if prices were to moderate or even fall slightly.

Still, the reality of cooling demand for housing is complex. Housing value performance is tied to consumption through wealth effects, property taxes are a huge source of state government revenue, and many Australians are employed across the construction, financing and transaction of real estate. Even with widespread equity, households are likely to be sensitive to weakening housing values, with RBA data suggesting residential housing and land currently accounts for 55% of household wealth. Not to mention the recent buyers and investors who purchased during periods of strong growth and are more exposed to price falls. About 20% of residential properties changed hands in the past five years, and roughly 2.6 million home loans have been written in this period (with around one in four going to first home buyers).

But the alternative - runaway prices, deepening inequality, and falling ownership rates - could prove more damaging in the long run. As a nation, we can’t keep kicking the can down the road on housing affordability.  Concessions and incentives for first home buyers might provide a sugar hit to home ownership numbers in the short term, but they do nothing for the long-term viability of home ownership as affordable and attainable.

This article was republished with permission from CoreLogic. Read the original article here.

Let's cut the bullshit - True Housing Solutions Require Courage

by Robert Pradolin, Founder & Director of Housing All Australians

Robert has been active in the property industry for over 40 years, most recently as General Manager of Frasers Property Australia (formally Australand) where he was for over 18 years. He is the founder and Director of Housing All Australians (NFP), is on the Board of Homes Tasmania and on Liverty Housing (which was formally Summer Housing) which is a disability housing provider. Through his career, he sat on a number of industry bodies including the Property Council of Australia (Vic), the Residential Development Council, the Housing Industry Association (Vic), the UDIA (Vic), Salvation Army Housing, Liveable Housing Australia, the Heritage Council of Victoria and was on the Victorian Board of Advisors of the Property Industry Foundation.

As political promises about housing affordability dominate pre-election headlines, we witness a familiar dance: politicians offering quick fixes while fundamental causes of our housing crisis remain unaddressed.

The reality, as economist Peter Tulip from the Centre of Independent Studies consistently highlights, is stark: Australia's housing crisis is primarily a supply problem. While negative gearing and tax concessions make convenient targets, they account for at most 4 percent of housing prices. The true culprits are restrictive planning regulations, NIMBYism, and bureaucratic delays choking our housing market.

KPMG's "Keeping Us Up at Night" report found 48 percent of business leaders identify housing affordability as their top social concern. Yet political discourse circulates around demand-side tinkering – 5 percent deposit schemes or mortgage interest tax breaks – that may help individuals jump the queue but ultimately fuel price inflation.

Housing All Australians has long advocated for housing to be reclassified as fundamental economic infrastructure – as essential as roads, schools, and hospitals. Without decent shelter, we face significant economic and social costs.

We must stop pretending there's a quick fix. Building our way out of this crisis will take decades. The Leptos review of NHFIC (now Housing Australia) in 2021, undertaken during the Morrison government, estimated the investment required to address just social and affordable housing shortfalls at $290 billion over 20 years – that's 44,500 homes annually. The Housing Australia Future Fund aims to build only 11,000 homes per year for five years. Where will the other 33,500 homes come from?

Government alone cannot bridge this gap. We must leverage private capital through innovative partnerships that respect both market economics and social needs. This is where compassionate capitalism enters the equation. Unlike American values that increasingly pit business interests against social responsibility, Australian values embrace the idea that profit and purpose can coexist.

Housing All Australians believes "compassionate capitalism" represents the true values of most Australian businesses. As our national anthem speaks of "wealth for toil" and "Advance Australia Fair," we understand that true advancement requires shared prosperity. Compassionate capitalism embodies this distinctly Australian ideal: Advancing Australia Fairly, ensuring economic growth and social wellbeing develop hand in hand.

This approach is already visible across Australia. The Ascott Group, through Housing All Australians, donated $500,000 in furniture to repurpose Hobart's Amelie House for vulnerable women. Companies like Metricon, Mirvac, Dulux, Interface, and CSR are similarly partnering with Housing All Australians to repurpose vacant buildings as transitional shelter. But this type of corporate philanthropy alone won't solve the problem – it's a short-term response to a country in a housing crisis. It needs systemic reform.

The deeply ingrained nature of compassionate capitalism in the Australian psyche became strikingly evident in September last year, when nearly 1,000 business leaders attended Associate Professor Gregg Colburn's presentation on his book, Homelessness is a Housing Problem. Their attendance wasn't merely professional interest—it reflected an instinctive Australian value response that many mightn't consciously recognise. When confronted with Colburn's findings that tight housing markets and high prices—not individual circumstances like mental health, addiction or poverty—drive homelessness rates, these business leaders responded to a call that resonates with our collective identity: that fair access to life's necessities aligns with both good business and our cultural values.

Shopping trolleys containing clothing and personal items in Adelaide's CBD. Photo: Michael Coghlan CC/Flickr.

Australia's 2021 Census counted 122,000 people experiencing homelessness (including those couch surfing), comparable to New York City's 98,000 (which doesn't count couch surfing). Our nation has effectively the same level of homelessness as a single American city. Australia can still end homelessness. Our increasing level of homelessness is the canary in the coal mine, warning of deeper failures across Australia's entire housing continuum. Our workers struggle to find accommodation near where businesses need them, making this housing crisis a business issue too.

An overlooked barrier to delivery of affordable medium and high-density housing is the differential construction costs between "domestic residential" (which builds housing using traditional subcontractors) versus "commercial residential" (which involves multi storey apartments and designates a unionised workforce).

The significant additional cost in delivering under “commercial residential” conditions means government policies relying on densification of middle-ring suburbs into mid-rise or high rise apartments are unaffordable for average families needing a family sized home. The theory of stopping urban sprawl sounds great, but a family seeking an affordable home cannot live in a 60sq metre apartment.

Creating housing supply that suits diverse societal needs is more complicated than commonly understood. Without deep knowledge of how property and construction industries actually function, idealistic policies are a waste time and resources. Its time we do not have!

Our politicians must level with the Australian public: there is no painless solution. Creating sufficient supply requires challenging entrenched interests, reforming planning laws, increasing density in established suburbs, boosting TAFE output, addressing industrial relations, and understanding how government infrastructure projects impact available resources. The fix to Australia’s housing crisis will take decades and requires considering multiple interconnected elements as part of a comprehensive strategy.

Australia needs, in the national interest, a housing accord that transcends politics – a bipartisan commitment to supply-side reforms that will outlast multiple electoral cycles and embrace private sector involvement. This isn't about the next election; It's about the next generation and the one after that. Our grandchildren's prosperity depends on decisions we make today.

Without addressing our housing crisis, Australia's grandest ambitions will remain just ambitions. It's time to stop political posturing and commit to the difficult, long-term work of building more homes where Australians need them. This requires political courage, planning reform, and honest conversations with communities about the true costs of maintaining the status quo. Anything less is just another empty promise.

This article was published with permission from the author Robert Pradolin from Housing All Australians.

Alternative Assets: The not-so-alternative sectors driving economic growth

By Mark Granter, Executive Managing Director, Alternatives & Client Care, Pacific - CBRE

Mark Granter joined CBRE in 1989 and currently holds the position of Executive Managing Director, Alternatives Capital Markets and Client Care for Pacific. The Alternative sectors are becoming a major focus for both local and global investors. CBRE have over 110 employees focusing on all the Alternative Sectors. Mark’s particular focus is on Healthcare, Data Centres and Renewables. Most recently In the last 1-2 years Mark has worked on some major Alternative appointments, including ANZ Data Centres in Australia and NZ, self-storage capital raise and two significant hospital and life sciences appointments.

Today’s advancing society is forcing the investment landscape to evolve. Recent years, marked by a global pandemic and population growth rates, have exposed the vulnerabilities of certain property sectors. Physical retail stores needed to move online to survive. Hybrid work practices from lockdown mandates pushed the office sector towards flight to quality to entice workers back in. 

“All this has done is highlighted the clear under-investment in sectors essential to a thriving economy and community,” says Mark Granter, CBRE’s Head of Alternatives in Australia and New Zealand.  

While these changes may have affected the typical performance of traditional property sectors like office, retail and hotels, Mark sees this as an opportunity to reset strategies rather than a setback. 

“It’s shown that investors need to diversify their exposure away from those traditional sectors and support these ‘alternative sectors’ if they want to maintain a healthy and balanced property portfolio.” 

What are the alternative asset sectors? 

Alternative assets essentially account for the sectors that reside outside of the traditional property sectors. They deliver the social infrastructure required for a healthy economy and community.

CBRE’s Alternative or ‘Essential’ Industries and Assets:

Energy and Renewables

• Renewables (Solar, Wind, Hydro and Battery Storage)

• Mining

• Oil

• Gas

• Battery

Data Centres

• Digital Infrastructure

• Telecommunications Assets

• Fibre-Optic Networks

Transport and Distribution Infrastructure

• Airports

• Roads

• Ports

• Rail/Intermodal

Living Solutions

• Built to rent

• Build to sell

• Purpose Built Student Accommodation

• Co-Living

• Affordable Housing

• Seniors Living, Aged care, Land Lease Communities

Healthcare and Life Sciences

• Medical

• Consulting Suites

• Hospitals

• Radiology & Imaging

• Mental Health

• Life Sciences

• Laboratories

• Research & Development

Social Infrastructure

• Childcare

• Education

• Recreation

• Self Storage

• Service Station

• Car Wash

• Caravan Parks

• Funeral Homes

What is the growth potential of alternative assets 

Despite the 'alternative' label, these sectors are far from supplementary in terms of growth,risk adjusted returns and performance. “Global investors have always had an allocation towards alternatives,” says Mark.  

“What's happening in Australia is that our local investors and superannuation funds are following suit, recognising the strategic value of these investments.” 

And there’s proof in the numbers.  

1. Renewables: We’re seeing growing investment momentum through HMC Capital’s acquisition of Neoen’s wind, solar and battery assets in Victoria. It’s an acquisition that will form part of HMC’s new $2 billion energy transition fund.  

2. Childcare: In 2024 there was $657 million in childcare sales - up 26% since 2023 - with the most dominant buyers being both local and Asian investors. Yields for this sector have remained very resilient compared to some of the more traditional sectors such as office, retail and industrial. CBRE also sold 14 childcare centres with a total value of $162 million.  

3. Data Centres: Most investment activity has been underscored by major merger and acquisition deals and land sales to operators. The two standout transactions were the $24 billion sale of the AirTrunk to Blackstone and HMC Capital’s acquisition of Global Switch and iSeek.  

4. Land Lease Communities (LLC): In 2024, Atlanta-based Invesco Real Estate made its first investment in Australian LLC. It comes in the form of a strategic capital partnership with Stockland to develop and hold LLCs. The joint venture is expected to inject $1.1 billion in gross development revenue in the early stages. Another major player, Mirvac Group, also announced its binding agreements to acquire one of Australia’s leading land lease operators, Serenitas, in partnership with two other firms for a total consideration of approximately $1 billion.  

“Investors are being driven by strong demographic trends, high population growth, an ageing population, and government initiatives,” Mark explains.  

“Government investment in childcare, the ageing population driving aged care and retirement. Population growth is also driving living sectors like build to rent (BTR). And then there’s the massive growth in the tech sector driving data centres.” 

Seizing the opportunities 

The growth potential is exceptional. Most of these sectors are set to grow 50-60%, if not 100%. A prime example is data centres, which are projected to expand from a $23 billion investment universe to $40 billion in the next five years, driven by the shift towards cloud-based applications, streaming services, social media, and artificial intelligence.  

“Government restrictions could even eventually play into the growth of Australia’s data centre industry, based off the existing restrictions on local data from being hosted on foreign data centres.”  

Alternatives sector challenges to be aware of 

It’s vital for investors to be aware of any challenges in property to help guide their strategies effectively. “The biggest issue in Australia for alternatives is scale,” says Mark. “Our market is small in comparison to other major global markets, but the growth trend is undeniable.” 

Other challenges include the evolving clarity around BTR, however Australian Government’s new laws offer a positive outlook with development tax incentives for developers and providers. 

The rising operating costs and pressure on the medical and healthcare sector is also another. “There is no quick and easy solution there, but we are confident it will be resolved, as private hospitals play an essential role in the Australian health system.” 

Future-proof your growth with CBRE 

As a global leader in property for over a century, CBRE is at the forefront of helping investors navigate dynamic growth sectors. With a team of 110 specialists dedicated across the Australian alternative sectors, CBRE leverages its global strength in specialised asset solutions, including global workplace solutions and partnerships with companies like Turner and Townsend.  

Begin your strongest investment journey in alternatives with us.  

This article is republished with permission from CBRE. Read the original article here.

A grab bag of campaign housing policies. But will they fix the affordability crisis beyond the election?

By Michelle Cull, Associate professor, Western Sydney University

Secure and affordable housing is a fundamental human right for all Australians.

Therefore, it is unsurprising the election campaign is being played out against a backdrop of heightened voter anxiety about rental stress and housing affordability. A growing number of people are unable to access housing that meets their needs.

And it’s not just low-income earners who are affected by housing pressures. It is also the millions of people who make up middle Australia; the very group that will help determine the election outcome.

The solution to Australia’s housing problem is complex. We need to start thinking differently about what reform might look like.

No cheap rents

For most Australians, housing is their biggest and most unavoidable bill.

The average national weekly rent for a unit is A$566 a week. It is even higher in capital cities. To afford this comfortably, renters need an annual income of $130,000.

But for someone on the median income of $72,592 (or $58,575 after tax) half their pay packet is being swallowed by their weekly rent.

This significantly exceeds the 30% benchmark that is a useful measure of housing affordability stress.

Million-dollar homes

The raw numbers are just as eye-watering for home ownership.

The mean price of a residential dwelling in Australia is around $977,000. For house hunters in New South Wales, the figure is even higher at $1.2 million.

The Australian dream of home ownership is out of reach for many low and middle income earners. Photo by Robert Couse-Baker

Rapidly rising house prices over the past few years have contributed to larger home loans and more people with a mortgage.

Only 13% of homes sold in 2022–23 were affordable for a median income household, with housing prices increasing more rapidly than wages.

The cascading price pressures mean first home buyers are finding it harder to save for a deposit.

Policy options

There is an urgent need for housing reform to overcome the affordability and accessibility challenges. There is no shortage of options available to policymakers.

For starters, planning rules and zoning regulations could be eased to facilitate more construction. Vacant commercial properties and office spaces could be repurposed as housing.

Another option includes removing barriers to constructing prefabricated homes, which are more efficient and affordable to build.

Time to be bold

Housing reform often involves debate around negative gearing and capital gains tax concessions for property investors. There are mixed results regarding how they would impact housing affordability and accessibility. The unpopularity of such policies at the 2016 and 2019 elections have since hindered any changes.

But more radical reforms could be considered. They include applying negative gearing to first home buyers, who would benefit by claiming the mortgage interest on their property against their income. The United States allows home-owner couples to claim mortgage interest on the first US$750,000 (A$1.19 million) of their loan to help them secure a home.

Overseas experience

The US policy highlights how high housing costs are not exclusive to Australia.

We could learn from other initiatives adopted overseas. For example, a bylaw passed in Montreal, Canada, requires new developments to include 20% social housing, 20% affordable housing and 20% family units.

Further, Vienna is known for its progressive social housing policies, which include rental caps and housing security. The housing is high quality and often includes access to communal pools, child care, libraries and other facilities.

Here in Australia, the major political parties are mindful that the high cost of housing is political kryptonite. They are fighting the May election armed with policies aimed at improving affordability and availability. But will these policies go far enough?

What the major parties are offering

Labor plans to increase housing supply by 1.2 million homes over five years by changing zoning and planning rules. This includes 20,000 social housing homes and 10,000 affordable rentals for front-line workers such as police and nurses. It will also increase tax incentives for the build-to-rent program to increase rental supply.

These policies are likely to improve affordability and accessibility for lower income earners. However, there will be a wait while homes are constructed. It is also expensive at around $10 billion.

To increase supply, Labor will invest in prefabricated and modular homes, including a national certification system to streamline approvals.

Labor will also expand the Help-to-Buy scheme so more Australians can purchase their first home, although this may push-up prices through increased demand.

The Liberal Party’s policy centrepiece is $5 billion to fast track essential housing infrastructure such as water and sewage, to unlock up to 500,000 homes.

High housing costs have contributed to Australia’s homeless problem. Photo by MART PRODUCTION

The Coalition is also vowing to free up more housing by reducing immigration by 25% and capping the number of international students.

For first home buyers, the Liberals want to allow early access to superannuation of up to $50,000, but studies suggest this could backfire by increasing house prices and hurting retirement savings.

Dream turns to a nightmare

Voters may find merit in one or more of the proposed policies, but bipartisanship will be essential if we are to solve the housing crisis, regardless of the election outcome.

And genuine reform involves more than sugar-hit policies that might find favour during election campaigns. It requires bold, decisive action with investment in areas that benefit those most in need.

Without genuine reform, even more Australians will struggle to put a roof over their heads. The ramifications will be devastating to Australia’s social and economic future.

The Australian dream of owning a home will be at risk of becoming an even bigger nightmare.

This article is republished from The Conversation under Creative Commons license. Read it here.