Australia’s backdown on data centres allows them to use energy from coal and gas. Here’s what that means

By Ehsan Noroozinejad, Associate Professor & Global Challenge Lead, Urban Transformations Research Centre, Western Sydney University

It’s official: Australia’s data centre boom will not be solely powered by renewables.

At the National Cabinet meeting on Wednesday, the federal government softened its stance on using coal and gas to power energy-hungry data centres.

Initially, the government said it would require new data centres to rely on renewables, backed up by batteries and gas. However, this has changed. Its new standards, set to be legislated in early 2027, leave room for some jurisdictions to use fossil fuels instead. Queensland and the Northern Territory have welcomed this shift.

So what are these new standards? And how do they fit into Australia’s “clean energy” transition?

Desperate for data

In our increasingly online world, data centres are a critical piece of digital infrastructure. These facilities store and process data around the clock. And they are needed to meet surging demand for generative artificial intelligence (AI), used in everything from health care to journalism.

However, both in Australia and overseas, local communities are increasingly worried about the potential risks of a rapid data centre rollout. These include strained water supplies, less land for housing, and persistent noise. Higher power bills are another concern, given how much energy data centres consume. The Australian Energy Market Operator estimates they will represent 13% of national grid demand by 2035–36, up from just 3% in 2025–26.

This week, Australia’s state and federal leaders agreed to develop mandatory standards for large data centres. These will regulate how much energy, water and land these facilities use. They will also cover skills and training, such as providing apprenticeships for workers involved in constructing and operating data centres.

However, the new standards leave responsibility for planning approvals in the hands of each state and territory. And questions remain around whether the proposed rules would apply to existing data centres, of which there are more than 250 across Australia, not just future projects.

New standards are a step in the right direction. However, they leave some major regulatory gaps, particularly when it comes to individual states.

No national standard

The federal government’s previous position required new data centres to pay for grid upgrades, avoid pushing up household bills and source additional clean energy, rather than simply rely on existing supply.

However, the new standards grant carve-outs for Queensland and the Northern Territory to use coal and gas. Queensland argues its publicly owned electricity system allows it to manage any cost or supply issues. The NT argues it should be free to use local gas, given it lies outside the National Electricity Market, which is largely limited to the eastern states.

Technically, this state-by-state approach could work. Data centres need “firm” power, or electricity that is available when renewable generation drops or is disrupted. The Australian Energy Market Operator says batteries, pumped hydro and gas can act as firming technologies.

Enforcement is key

However, these carve-outs must not compromise the government’s goals of lowering climate emissions and ensuring that energy remains affordable.

That is why enforcement matters. Consider New South Wales, for example, whose new policy framework is built on six key principles. These include strong environmental and efficiency standards and no net costs to consumers and communities.

Developers wanting to build data centres that meet these requirements can get a faster 75-day assessment of their planning application. Non-compliant proposals are not automatically rejected, but do lose access to this fast-tracked process and can be modified, approved with conditions, or simply refused.

To properly enforce our new standards, Australia must learn from other regions.

The European Union requires major data centres to report their energy and water use. It is also developing a ratings system to compare how efficient each centre is, alongside minimum standards for energy consumption and water use.

In Ireland, the government considers various factors – including grid demand and broader renewable energy goals – when assessing new data centre proposals.

Ensuring communities benefit

Australia, like many countries, is racing to regulate its rapidly expanding data centre sector.

To do so, we can draw on international approaches that mandate clear approval processes and public reporting.

We must also engage communities throughout the development process, starting with early consultation. This will ensure data centre projects offer concrete benefits, such as shared energy infrastructure and structured apprenticeships, not just increased capacity.

We need more research about how data centres affect water supplies, peak power prices, noise levels and emissions. Importantly, studies must use real operating data, not just estimates provided by developers.

The federal government has given states and territories more say in how they power data centres. But strong enforcement is key to ensuring every project keeps energy costs low, protects the environment, and offers lasting benefits for local communities.

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

Bricks, not business

Australians are retreating from business ownership and investing more in property - that’s a problem for productivity

By Daniel Beadle, Economist - CEDA

Australia's entrepreneurial base is shrinking. Since 2000, the share of the working-age population running their own business with employees has been in structural decline. Most strikingly, the fall has been sharpest among those best financially equipped to start one.

Entrepreneurship is an essential ingredient in Australia’s business dynamism, economic growth and productivity. New and young businesses are strongly associated with an innovative and resilient economy.1

Using data collected every four years on the financial conditions of respondents from the Household Income and Labour Dynamics in Australia (HILDA) Survey, we find Australia’s decline in entrepreneurship has been greatest among individuals in the wealthiest 20 per cent of households. Between 2002 and 2022 (the latest available data), the share of working-age individuals in that quintile who are business owners with employees fell from 13.8 per cent to 9.8 per cent.

This decline has coincided with a rise in property investment. Among the same top wealth quintile, the share of working-age individuals with at least one investment property grew by 8.1 percentage points between 2002 and 2022.

The Australians best financially placed to start a business are doing so less, while investing more in property.

Similar trends are evident in the value of assets held by households. Over the past two decades, the wealthiest Australians have seen the proportion of their wealth tied to business assets fall, while the portion tied to investment properties has risen.

The drivers of declining entrepreneurship are complex and layered, but addressing distortions that favour property investment over businesses can help correct this trend.

Here, the 2026-27 federal budget makes progress, paring back long-standing advantages enjoyed by property investment while increasing concessions for small and young businesses. The commitment to cut the regulatory burden matters too, but the cuts must target the specific barriers to business entry and growth and be supported by action at all levels of government.

Entrepreneurship has declined the most among the wealthiest households

Entrepreneurs are a small but important cohort in Australia's business community. Those who choose to challenge the business status quo, push the technology frontier or deliver new products to market play an outsized role in business dynamism and economic growth.2

As documented in our previous report, Hustling, not Hiring, Australia has experienced a structural decline in business formation and self-employment since 2000.3

HILDA Survey data shows the decline is broad-based across the wealth distribution, but sharpest at the top. Among working-age individuals in the wealthiest 20 per cent of households, the share operating a business with employees has declined from 13.8 per cent in 2002 to 9.8 per cent in 2022 (figure 1).

The decline in entrepreneurship has coincided with a rise in property investment rates. In 2022, 22.1 per cent of working-age individuals in the wealthiest quintile of households owned an investment property, up from 14.0 per cent two decades earlier (figure 2).

Household wealth is increasingly tied to property, not business

This is also borne out in where wealth sits. Among the wealthiest 20 per cent of households, wealth tied to the ownership of businesses has fallen from 11.0 per cent of total wealth in 2002 to just 4.4 per cent in 2022. Over the same period, the share tied to property, excluding the family home, has grown from 10.2 per cent to 14.2 per cent (figure 3).

While part of the increase in property wealth can be attributed to rising property prices, these trends suggest those who traditionally started a business, and are best financially equipped to do so, are instead seeing more of their wealth concentrated in the property market.

This has led some to raise concerns about the broader impacts of the recent slowing in house prices. These concerns are overstated. Even considering recent falls in values, house prices nationally are still up by more than double compared to 2010 (figure 4).

A policy system that favours property investment over businesses

These trends reflect policy settings that have steered capital towards property and away from entrepreneurship.

The 1999 capital gains discount rewards capital growth over rental or business income and has systematically overcompensated detached housing for inflation.5 Negative gearing compounds the effect, with losses deducted against gains taxed at a discount.6 

These settings have made property an attractive place to invest, without necessarily adding to supply. Less than 20 per cent of loans to property investors are used to expand housing supply, with the rest flowing into existing dwellings.7

Business investment has enjoyed no such tailwinds.

The small business capital gains concessions have remained gated by a $2 million turnover threshold and a $6 million net asset test, unchanged since 2007 even as consumer prices have risen roughly 64 per cent.8 

The growing regulatory burden adds to this problem, raising the cost of doing business and discouraging entry and growth. As an example, opening a café in Brisbane means working through a council checklist with up to 31 steps ‘before you can sell a single flat white’.9

Taken together, these policies reward passive investment in existing property over the productive risk-taking that drives new businesses, jobs and dynamism.

Adjusting incentives to encourage entrepreneurship

Investment incentives are not the only reason people start businesses, but they do matter. The current system has nudged household wealth towards property investment and away from business. That needs to change if we want to deliver more affordable housing and a more dynamic economy.

In this regard, the 2026-27 federal budget makes meaningful progress. Removing negative gearing on existing property and modifying the capital gains discount will rebalance some of the preferential treatment property has long enjoyed.

Other new policies should improve conditions for those starting a business. The permanent $20,000 instant asset write-off, a new loss refundability measure for early-stage start-ups and the raising of the small business concession threshold should incentivise business investment.

These initiatives alone will not be sufficient to invigorate Australia’s business dynamism. Feedback from businesses engaged with CEDA and a growing body of research consistently highlight the role regulation currently plays in stifling economic activity.10 This must be addressed.

Regulation that cannot demonstrate a clear link to improved outcomes should be heavily scrutinised and revisited. Governments also need to focus on the cumulative effect that individual, often well-meaning regulation can have on productivity and dynamism. The commitment from the federal government to reduce the regulatory burden by $10.2 billion is a good start but needs to be followed up by action and discipline.11

Altogether these measures will begin the process of correcting a system that for too long has favoured bricks over businesses.

This article has been republished from CEDA via a Creative Commons license. Read original.

Urban trees cool the world’s cities more than we thought – but we can’t rely on them alone

By Manuel Esperon-Rodriguez Researcher in Urban Transformation, Western Sydney University, Rob McDonald Research Scientist, City University of New York and Tirthankar Chakraborty, Earth Scientist, Pacific Northwest National Laboratory

Cities and towns are usually 1–3°C hotter than the surrounding countryside, because asphalt, concrete and brick absorb heat from the sun and radiate it slowly. Some cities can be as much as 7°C hotter. This effect is known as the urban heat island.

This can be dangerous, especially in hot countries. In very hot conditions, dehydration and heat exhaustion become real risks. If it gets too hot, it can be lethal.

There’s one simple antidote: urban trees. Authorities around the world have planted more trees to counteract the heat.

But how effective is this? How much hotter would our cities be without trees?

To find out, we analysed data from nearly 9,000 cities around the world, home to about 3.6 billion people. As our new research shows, trees almost halve how much heat is trapped by the urban heat island effect.

This cooling is welcome. But it is far from even. Wealthier, suburban and humid cities have more trees on average.

Why focus on trees?

Trees act like natural air conditioners. They shade the ground and stop asphalt and buildings from heating up in the first place. They also cool the air by releasing water vapour from their leaves in a process called transpiration, lowering surrounding temperatures. They can make a noticeable temperature difference, especially on sizzling summer days.

Trees offer a simple way to counteract urban heat. This matters. More than half the world’s population (55%) now live in urban areas according to the United Nations. By 2050, that figure is expected to rise to 68%. Cities are facing a hotter future, as climate change drives more intense and more frequent heatwaves. The urban heat island effect makes cities hotter still.

What did we do?

We wanted to know the answer to a simple question: how much hotter would cities be without trees?

To find out, we analysed global datasets of air temperature and fine-scale tree cover across almost 9,000 cities. Then we modelled a “what if” scenario, where all tree cover was removed, and compared it to current conditions.

This allowed us to estimate the real-world cooling effect trees provide for air temperature, which is the main way we perceive heat.

Most previous global studies have used surface temperatures, often from satellite data. But surfaces like roads and rooftops can become much hotter than the surrounding air above them, especially in direct sunlight. That can give an overestimate of how much cooling trees provide. Air temperature, by contrast, better reflects what people actually feel, making it a more reliable measure of heat.

Good tree cover like this urban forest in Sydney make cities much more liveable.

So what effect do trees really have?

The effect was much larger than we had anticipated.

Globally, trees cut the urban heat island effect by almost 50%. Since the average urban heat island effect typically adds around 1–3°C, this translates into cooling of roughly 0.5–1.5°C in many cities.

For more than 200 million people, trees reduce local air temperatures by at least 0.5°C, enough to make a meaningful difference during extreme heat.

Cooling can vary a lot from place to place.

In hot, dry cities such as Phoenix in the United States, differences in tree cover can create clear differences in air temperatures. In more temperate cities like Lisbon in Portugal or Gothenburg in Sweden, the overall cooling is still significant, but generally smaller and more consistent across the city.

Trees are not evenly distributed

A city’s trees are not spread evenly. They’re often concentrated in wealthier neighbourhoods and suburban areas. Cities in cooler or more humid climates tend to have more.

Trees are scarcer in lower-income cities or in rapidly growing regions. This inequality is also visible in many cities. Leafy suburbs are usually several degrees cooler than nearby neighbourhoods with little vegetation.

There’s a strong link with wealth. In the United States, lower-income areas average 15% fewer trees than wealthier areas – and are 1.5°C hotter. This means the people who need free cooling from trees the most are often the least likely to receive it.

On the left, a wealthier Sydney suburb with dense tree canopy cover. On the right, a newer suburb with far fewer trees. These suburbs are typically hotter and more exposed to extreme heat. Manuel Esperon-Rodriguez

Planting more trees isn’t enough

Planting trees is often promoted as a simple solution to city heat. Trees are visible, relatively low cost and come with other benefits such as cleaner air and better mental health.

It’s no wonder authorities look to urban trees as a way to counteract the heat from escalating climate change. When you stand under a tree on a sweltering day, the cooling feels immediate and powerful.

But our study shows their effect is more limited in the face of climate change. The world’s current urban trees would, we estimate, offset just 10% of the extra heat expected by mid-century under moderate climate change scenarios. With ambitious planting, this could rise to around 20%.

While important, it’s not enough. A large majority of the extra heat will go unaddressed.

What else can be done?

If the world’s cities are to cope with rising temperatures, trees have to be seen as part of a broader strategy – not the whole answer.

Clever urban design can cut heat by using reflective materials, increasing green spaces and improving airflow between buildings. Green roofs and shaded streets can also make a difference.

New tree plantings should target hotter neighbourhoods with less existing tree canopy, as these will deliver the greatest benefits.

Of course, these measures don’t replace the need to tackle climate change directly by cutting greenhouse gas emissions.

Using trees wisely

Billions of trees grow in the world’s cities. They are hugely valuable, acting to cool cities, support biodiversity and making urban areas more liveable.

The challenge for city residents and authorities is to use trees wisely. Plant them where they’re needed most and combine them with other methods of reducing heat. Trees are remarkable. But they can’t do it all.

This article has been republished via a Creative Commons license. Read original.

Expert National State of the Market Report – BTS & BTR – H1 2026

By Charter Keck Cramer Research

This is the official release of Charter Keck Cramer's National State of the Market - Residential Build to Sell (BTS) and Build to Rent (BTR) Apartments, H1 2026 report for key metropolitan areas.

Report Overview

Our Research team has consolidated our market-leading insights into a National State of the Market Report, delivering a comprehensive overview of Australia’s apartment market.

Drawing on our extensive national database, this report examines key indicators including apartment releases, commencements and completions, while offering deep insights into each capital city’s performance. Notable trends and broader market drivers are also analysed to provide essential context at both the national and metropolitan levels.

To view the digital report and download your free copy, complete the form at the bottom of the page.

BTS Apartment Market

The BTS apartment market faces ongoing and increasing headwinds. This is most easily observed in the alarmingly low levels of current and forecast BTS apartment supply across Australia’s capital cities. Set out below under the various headings are some of the key findings from our research for H1-2026.

Impact of the Federal Budget on the BTS Apartment Market.

The Federal Budget Tax changes announced in May 2026 are the most significant changes in the last 30 years.  They have created tremendous uncertainty, and many developers, financiers, owner occupiers and investors have adopted a “wait and see” approach until these changes are fully legislated. 

Our views are that the Government has misunderstood the impact of these changes on the BTS apartment market. Firstly, there will not be a “one for one” replacement of investors moving from established into new stock. Investors will now fully reconsider all investment decisions including moving into other asset classes. Secondly, there is now a disincentive for new stock, which loses the new dwelling tax benefits upon resale, and which the market will need to price in.

Most importantly, the changes to lending by Self-Managed Super Funds (SMSF) are an error of judgment made on incomplete data and a fundamental lack of understanding of the new housing market. Discussions with our residential valuers shows that SMSF investors make up around 20% - 30% of Off the Plan buyers of BTS apartments in Melbourne or Brisbane and the buyer pool has now disappeared.

The impact of these changes, should they be legislated as proposed, will be that BTS apartment supply decreases even further. This will lead to further rent and also price increases and will have the opposite impact to what the Government is trying to achieve.

We acknowledge that the Federal Government has good intentions however it has failed to make the correct evidence-based decisions with a true understanding of the impact on the new housing market. Government is strongly advised to carve out the SMSF lending changes and allow these buyers to continue to purchase new BTS apartments under the previous settings.

Private credit in the BTS Apartment Market

Whilst private credit has been around in various forms for over 15 years in Australia, it is now well and truly part of the lending landscape in the new housing market.

Private credit has a critical role to play in the new housing market. It is able to provide flexible and customisable solutions to projects and developers that are typically not available from the Big 4 Banks at various points in the market cycle.

Private credit played an essential role during the pandemic and is in fact the primary reason many BTS apartment projects survived as the Big 4 Banks withdrew from the market.

Private credit in 2026 however is facing major issues that cannot be ignored. In the last 3 years, there has been a surge of players in this space. Our observations are that not all of these operators have the same lending rigor, risk assessment policies or overall transparency across their funds.

Put simply, there is a lack of transparency with several private credit operators at present and we have concerns about the frequency of valuations being undertaken for several projects in Melbourne and western Sydney.

We are aware that there are active projects in Melbourne and Sydney that are not financially viable at present. Discussions with our valuers shows that private credit is in fact preventing land values in certain projects from correcting and in previous cycles the market would have likely already corrected.

Private credit operators need to be aware of this and there is a risk that the industry perception stands to be tarnished if there is not greater openness and transparency with the status of some projects.

It is interesting to hear that certain developers have mentioned to buyers that they are using the Big 4 Banks for their project financing and this has given buyers greater levels of comfort than if private credit had been involved.

Our advice is that certain providers must be more open with the performance of their funds and also act on projects now so as to avoid undermining the perception of private credit in the marketplace.

Building and construction issues in the BTS Apartment Market.

We have written about the costs of delivery crisis in Australia in previous reports. Government is well aware of the “tax wedge” which is a large contributor to this crisis and is again advised to look to reduce this wedge which will flow through to more affordable housing.

Another factor that needs to be discussed is the inefficiency and lack of productivity and innovation in the building and construction sector. This has also contributed to the dramatic increase in the costs of delivering new housing – particularly BTS apartments. 

Our readers would be well aware that it is either land values, building costs or realisable revenues that need to adjust or reset so that the market can once again be activated. Our views are that land values and revenues will adjust across various sub-markets based on the supply and demand dynamics of those markets.

A key variable that is not discussed enough is that of building and construction costs. The industry needs to start to address the issues with the unions in certain States, adopt AI and also Modern Methods of Construction (MMC). This will bring down costs and speed up delivery times for new housing supply.

The Federal and State Governments also need to provide legislative support and incentivise the market to evolve, and in our opinion, this is the next component of the value chain in new housing delivery that needs to be reformed to unlock new housing delivery.

Latent Defects Insurance LDI for Apartment Projects

Our research shows that BTS apartments still suffer from a stigma that needs to be overcome by education. We have written previously that not all BTS apartment projects are the same and not all will leak, crack or catch on fire. Many developers have brands to protect and are very proud of their product but have unfortunately been tarnished by the actions of the minority in the industry.

The LDI is a positive move as is the iCIRT Rating Tool in NSW. This will give buyers more comfort that they are purchasing a dwelling that is fit for purpose and will be rectified without significant out of pocket costs should this be necessary.

Our advice is that the entire industry needs to adopt LDI and also educate the buyer market about these changes so that buyers regain confidence in this asset type.

Finance in the BTS Apartment Market

Our discussions with the Big 4 Banks indicate that they are starting to re-enter the market in anticipation of the next cycle. Pleasingly, there is little distress on their books given they lost market share to private credit over the last few years. They are gaining it back now with very competitive lending terms.

Our views are that the financing of the new Off the Plan BTS apartment market needs to evolve in response to buyer requirements for evidence of construction commencing (or being completed). The financing to date can typically be described as an “investor-product” model rather than an “owner-occupier” model. The “owner-occupier” model needs to offer more flexible products that caters for residual stock and longer sales periods after construction has been completed.

State Governments also need to play a role here and NSW is commended for taking the lead with the pre-sales guarantee. It is positive to see other States including WA and also SA adopting a similar policy and this will greatly assist the industry. Our views are that the Federal Government ought to consider a form of this guarantee as this can underpin the Housing Accord targets and send the correct signals to industry.

Buyer capacity for BTS Apartments

Our research shows that due to rate rises and the costs of delivery it is actually buyer capacity rather than an absence of demand that is holding back buyers in many markets. APRA is helping with the requirement for lower levels of presales, and certain banks are commended for decreasing interest rates on certain loan products notwithstanding the RBA has been increasing the cash rate.

On the ground discussions with sales agents indicate that smaller apartments that are functional and liveable are coming back into demand as they meet buyer budgets.  Small, well designed BTS apartments are one of the solutions to the housing crisis that need to be permitted through State planning schemes.

Furthermore, given the changes to SMSF lending, there are a number projects (even in Brisbane) now chasing channels to move stock. This is a risk that needs to be monitored given that new BTS apartments in many sub-markets are up to +30% more expensive when compared to product in 2020. Our analysis highlights that there is settlement risk on the horizon, and the industry needs to be aware of and mitigate this. This can be done by contacting buyers and ensuring they are able to take out the same amount of money as a few years ago when lending conditions were very different.

Finally, given rate rises and the Federal Budget changes, the Big 4 Banks, as well as APRA and RBA must be aware of the growing lending risks that will likely arise in the next 12 months when projects start to settle, and buyers are unable take out what they thought they could take out when they put down their deposit.

Outlook for the BTS Apartment Market

The BTS apartment market has been the beneficiary of substantial planning changes implemented by various State Governments. This has led to a notable increase in development approvals (particularly in NSW). This is however only a piece of the puzzle, and this approved stock will not get built until the costs of delivery crisis as mentioned above is resolved.

On balance the BTS apartment market will continue to face headwinds, and supply will not be mobilised. This is likely to be the case until the buyer market is more comfortable that interest rates have stabilised and additionally the Federal Budget changes are fully legislated and understood by the market.

What has become clear is that land values, costs and realisable revenues need to reset in many sub-markets across Australia. In some markets it will be land values or revenues that adjust over time however it is costs that are the swing variable, and which are more controllable by the industry.

A key learning for the Government is that when it makes significant changes, much like have recently been done at the Federal level, these distort the market and buyer behaviour. The changes need to be fully explained to the public and not be reactionary. Government is encouraged to make evidence-based policy decisions whilst understanding the nuances of the market. Should they do the opposite they will undermine their aspirations and ultimately do more harm than good.

BTR Apartment Market

The BTR apartment market faces fewer headwinds than the BTS apartment market and this is reflected in the increasing levels of current and forecast supply across several capital city markets.

Set out below under the various headings are some of the key findings from our H1-2026 research.

Impact of the Federal Budget on BTR Apartment Market

BTR was an indirect beneficiary of the Federal Budget as it was carved out of any changes. The optics could however have been better as capital has been left a little underwhelmed and unsure by what to make of the Federal Budget.

Given the headwinds now created for BTS apartments our views are that this is a seminal moment in time for BTR to scale up given BTS will not be able to respond.

In our opinion, the Federal Government has inadvertently pushed Australia down a path of renting. In fact, we would go as far as commenting that should the proposed changes be legislated in their current format we may look back at this as the point in time that the Federal Government unintentionally turned Australia into a nation of renters.

BTR Apartments are now part of the housing continuum

There are now 19,000 completed BTR apartments across Australia. These figures, as well as the recent transactions, show that BTR is now part of the housing continuum and can no longer be considered as an alternative asset class. On this basis, BTR needs to be better acknowledged and legislated for in planning and building legislation.

The MSCI Australia Build to Rent Property Index index is also a significant positive step forward.  This will help finance with benching returns and provide clarity for the industry on various project metrics and performance.

Finally, BTR projects can also show Australians that higher density buildings are in fact great places to live and if built and maintained well can hold their value and lead to desirable housing outcomes.

Taxes on BTR Apartment Projects remain prohibitive

The single biggest finding from our discussions with industry is the impact of taxes and charges and the signals they are sending to foreign and local capital.

Government taxes are still holding capital back with several developers estimating that the sector could already be two or three times larger than it currently is. Given we are in a housing crisis and the Housing Accord Targets will not be met, this is a finding all levels of Government need to reflect upon.

State Foreign Purchaser Surcharges for example are a huge issue at present and the changes by the NSW Government have been extremely well received by the industry. Other States and Territories are encouraged to follow suit and send the correct market signals to capital that they are open for investment.

Role of BTR Apartments in the current cycle

Our government readers are reminded that BTR projects don’t have to be affordable to have a positive impact on housing supply (and ultimately price and rents). Additional high density rental supply will grow and also rebalance the housing market and allow various household types and income levels different opportunities to enter the housing market across the full spectrum.

Whilst the mid-market has yet to emerge, this will come as the market continues to evolve and mature. Government is advised that affordable or even mid-market BTR will need some form of rental subsidy so that rents can be set below market values but still make projects financially viable. This has in fact been successfully demonstrated in Brisbane where the State Government has subsidised a component of rental accommodation for key workers.

Current Trends in the BTR Apartment Market

Our discussions with industry and various research engagements show that there are many developers, financiers and operators fully exploring the living sectors model (BTR, co-living and also PBSA) on their high-density projects.

There is also a lot of product diversification in these projects with BTR, co-living and also PBSA all being considered across a single project in various buildings. This is mainly occurring in Sydney as these projects chase yields and returns that make projects viable.

Given the renter market is now much better educated on BTR, there has been a focus on brand awareness across projects and platforms. This is a key finding operators and platforms need to be aware of as this is an opportunity to capitalise the quality of the brand into the performance of the asset and portfolio.

There also continues to be a focus by financiers on the efficiency of the respective operating platforms and how net operating income is maximised. Our learnings are that the gross to net ratios are higher than initially estimated (closer to 30% gross to net) although this is anticipated to reduce over time.

Discussions with the industry highlight that there is also no shortage of debt capital for BTR projects. The sticking point remains raising equity capital. Projects that have a DA, are close to current or future transformative public transport and have a builder signed up are most attractive to equity capital at present. Projects without these attributes are struggling to convince equity capital to take the risk in the current cycle.

Finally, there remains little true information on weekly rents given the market is so badly distorted in many sub-markets. Our clients are finding it very hard to set rents in the current environment and evidence of the true rental premium is hard to empirically prove.

Builder’s experience with BTR Apartment Projects

Our research highlights that builders are attracted to BTR projects. The main reasons are that there is a single client, fewer variations or major changes (compared to BTS projects), the projects have scale and builders like the programmatic nature of the projects.

Early Contractor Involvement (ECI) is a great format, and the developer, financier and builder have all experienced positive results with them.  ECI appears to be a way of the future for both BTR and BTS projects and is something the industry needs to continue to embrace.

Finally, a key learning is that defects need to get rectified before practical completion (PC) and leasing of the building commences. Whilst this means that PC for BTR takes longer when compared to BTS projects, the outcome is better and this can be capitalised into the leasing velocity, weekly rents and overall brand and reputation of the building.

Outlook for BTR Apartments

Given the significant headwinds facing BTS apartment projects, we anticipate that several will consider pivoting to BTR (or a living sector component such as co-living or PBSA) over the next 6-12 months.

There is also likely to be consolidation of BTR platforms or BTR projects. This may be the strategy of some developers, or it may be borne out of necessity given the growing scale and size of the largest platforms and operators.

Our views are that now is the time for the Australian Superannuation funds to enter this market and scale it. The market has derisked to a point where there is greater transparency in terms of returns. Superannuation funds have a key role to play in this sector given they will be housing many of their members into the future.

Finally, given rents are likely to continue to rapidly increase, we anticipate the inevitable reactionary and short-sighted political response from various levels of Government or political parties about rent controls being raised once again. As we have previously stated, this must not be pursued as it will stifle BTR supply and lead to similar results as is unfortunately happening with BTS apartments.

Charter Keck Cramer is here to support with independent, evidence-based and forward-looking market research and analysis.

This article has been republished with permission from Charter Keck Cramer. Read original.

How the ‘Big Build’ corruption allegations brought down the Victorian premier

By Yee-Fui Ng, Associate Professor, Faculty of Law, Monash University

Victorian Premier Jacinta Allan resigned on the morning of July 28, just before a caucus vote challenging her leadership.

A major factor for her resignation is revelations from the Big Build corruption.

Most recently, Nine media reporting revealed Allan was briefed on the Big Build corruption by senior public servants in June 2023, when she was transport minister.

The briefing showed Allan was notified about criminal and bikie infiltration of the government’s $109 billion infrastructure program. The brief stated this had “a bearing on project costs, program, productivity and culture”.

This undercut Allan’s arguments there was no cost blowout from CFMEU (the Construction, Forestry and Maritime Employees Union) involvement, saying instead it had simply been as a result of inflation.

Allan claimed she had never seen this brief.

The alleged corruption has reportedly cost Victorian taxpayers around $15 billion.

Other allegations have surfaced about the premier approving an $837 million payment based on CFMEU demands.

Media reporting also alleges that in 2022, Allan as transport minister applied ministerial pressure to enable the union to hire a corrupt labour hire company, costing the taxpayer $2 million more than the alternative firm.

Allan has denied any wrongdoing.

What happened in the Big Build?

An independent investigation has shown organised crime and outlaw motorcycle gangs penetrated major government building projects through the CFMEU, driving up costs through extortion, fixed procurement deals and “ghost shifts” – labour hire companies charging for shifts that were never worked.

After the union was placed in administration, threats were made against the life of administrator Mark Irving, ACTU Secretary Sally McManus, then-Workplace Relations Minister Murray Watt, and The Age’s investigative journalist Nick McKenzie.

What has been done so far?

Allan referred the Big Build to the Victorian anti-corruption watchdog in 2024.

But the agency cannot investigate this, as it lacks “follow the money” powers to investigate projects subcontracted to the private sector.

By contrast, the New South Wales Independent Commission Against Corruption (ICAC) has these powers.

Allan has confirmed laws will be passed to give Victoria’s watchdog these powers, which will operate retrospectively.

However, even if laws have passed, this depends on IBAC deciding to investigate. It is also unclear if there will be public hearings, given the agency’s high threshold for public hearings.

Allan also said Victoria police have laid more than 90 criminal charges, including against outlaw bikies, senior union officials, minor gangland figures and labour hire company owners. The Labour Hire Authority has cancelled the construction licences for 164 firms.

On Monday, Allan announced the creation of a new crime agency to break up organised crime.

However, despite the mounting pressure, Allan has consistently rejected a royal commission. This inaction has taken her scalp.

Why do we need a royal commission into the Big Build?

A number of ministers now back a royal commission into the Big Build, including the Deputy Premier Ben Carroll, who is expected to take over the leadership.

This means that if Labor wins the November election, it is committed to calling a royal commission into the Big Build. Opposition leader Jess Wilson has also committed to a royal commission if she becomes premier.

As royal commissions are expensive, it is necessary to ask why we need one.

We don’t know at this stage how much the Victorian government knew about – or was complicit in – the corruption.

The full extent of corruption and government involvement will only be uncovered by an independent inquiry with coercive powers.

For instance, the Costigan Commission on the Painters Dockers Union successfully exposed numerous crimes in the 1980s, including a string of murders, assaults, tax fraud networks, drug-trafficking syndicates and intimidation.

The public hearings brought the issue to light, and forced the government to act on its recommendations.

The Victorian government’s preference to sweep this under the carpet is indefensible. With this scale of public money wasted, criminality and deep-rooted corruption, it is necessary to fully ventilate the issue.

The police are able to arrest those who have committed crimes, but will not be able to uncover government involvement in this sorry saga. The police force’s remit is confined to criminality, and not “grey” corruption (unethical behaviour that breaches integrity but doesn’t meet the strict legal definition of criminal conduct), such as conflicts of interest, “jobs for mates” or pressure to award contracts that don’t offer value for money.

In this context, a royal commission, although expensive, is the appropriate way to deal with the issue in a public forum. An independent commissioner with coercive powers is required, given the level of criminality of some likely witnesses.

The government’s promises to change the culture rings hollow if they’re not backed by firm repercussions and holistic reform proposals.

Victoria is deep in debt. This is not helped by the levels of corruption in the Big Build projects.

The public has a right to know what has happened, be assured that criminal behaviour is not explicitly or implicitly condoned by government, and understand how we can avoid such ignominious issues in the future.

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

Construction costs rebound to steady growth

By John Bennett, Cotality’s Cordell Costings Estimation Manager

Australian construction cost growth accelerated over the June 2026 quarter, reversing the sharp slowdown recorded earlier in the year and confirming the March quarter lull was an anomaly rather than the start of a sustained downturn.

‍Cotality’s latest Cordell Construction Cost Index (CCCI) recorded a 1.0% increase in construction costs nationally over the quarter, a significant acceleration from the 0.2% rise in the previous March quarter.

On an annual basis, construction costs rose 2.8% over the 12 months to June, up from 2.3% in March. While this demonstrates stronger growth, this increase remains historically subdued, sitting well below the rates experienced throughout much of the post-pandemic period.

Cotality’s Cordell Costings Estimation Manager, John Bennett said the June quarter’s results reinforce the March quarter slowdown was an anomaly, rather than the beginning of a sustained easing cycle.

“The return to a 1.0% quarterly increase brings cost escalation back to levels seen prior to the softer conditions seen at the start of 2026, highlighting the ongoing resilience of underlying construction cost pressures across the country.

“While the current annual result is approaching, but still marginally below, the 2.9% annual growth recorded in the March and June quarters of 2025,” he said.

NSW records strongest quarterly uptick

Mirroring the national trend, construction costs across the states accelerated sharply, bouncing back from a muted March quarter.

New South Wales recorded the strongest quarterly increase at 1.1%, up from 0.2% in the previous quarter. While Queensland, South Australia and Western Australia each recorded growth of 1.0%, consistent with the national average. Victoria recorded the lowest rate of escalation nationally at 0.9%, although this still reflects a notable improvement on March quarter results.

However, Mr Bennett said, “Looking at the longer-term trends, all states continue to track below their respective five-year average rates of cost growth.

”Nationally, the five-year cumulative increase now stands at 29.5%, a slight easing from 30.1% recorded in the previous quarter, representing a decline of approximately 60 basis points.

Materials hit with a supplier waiting game

The June quarter saw movement across several material categories, including the early effects of supply-chain disruptions associated with the Middle East conflict.

PVC and PEX pipe products were among the most notable categories impacted, while increases were also observed in the cost of heavy plant, crane hire, and associated machinery.

“Despite considerable media attention surrounding construction inflation and forecasts of rising building material costs, these pressures are not yet being fully reflected in observed material pricing, said Mr Bennett.

“Instead, suppliers appear to be recovering costs through fuel levies, freight charges, logistics fees, and other surcharges, rather than implementing widespread price hikes.

“Right now, it's a waiting game for suppliers, who are holding back on passing through the full force of cost increases until the global economy stabilises,” he said.

Construction sector outlook for 2026

Mr Bennett said market observations suggest the industry is remaining cautious, as pressure continues to build on project’s margins and overhead costs – a dynamic set to shape the construction landscape and drive ongoing monitoring through the rest of 2026.“

While underlying cost pressures remain evident, the timing and magnitude of future increases will largely depend on how both domestic and global market conditions evolve over the coming quarters,” he said.

“Overall, the June quarter results indicate that construction cost escalation has returned to a more established growth pattern, albeit at rates that remain well below long-term historical averages.”

This article has been republished with permission from Cotality. Read original.

The data centre boom won’t mean higher power prices – if we unlock stalled renewable projects

By Mehdi Seyedmahmoudian, Professor of Electrical Engineering, School of Engineering, Swinburne University of Technology

To meet demand from artificial intelligence companies, some of the world’s largest data centres are planned for the outskirts of major Australian cities. Dozens more are planned. OpenAI chief Sam Altman has said Australia could be a global leader.

This week, Prime Minister Anthony Albanese announced plans to fast-track new data centres. He promised the AI boom would not drive up power prices. The government would require big new data centres to “underwrite new power supply” and to “put at least as much energy into our grid as they take out of it”.

The push for more AI data centres is increasingly controversial. Huge data centres use a lot of power to run their servers and keep them cool. In the United States, the AI rush has led to a boom in gas generation as well as for clean energy.

If done poorly, Australia’s data centre boom could risk the ongoing shift to renewables and storage – and potentially drive up power prices.

But if it’s done well, the boom could be a win-win for energy. Many solar and wind projects have been stuck in limbo waiting for grid connections. Locating data centres in these areas could unlock new renewables – and decentralise the AI boom.

Is surging power demand a problem?

Power use by AI-focused data centres worldwide could potentially triple by 2030, according to International Energy Agency forecasts.

Last year, a study commissioned by the Australian Energy Market Operator suggested data centres could account for around 6% of National Electricity Market electricity demand by 2030.

But it could go higher still. Australia has a growing pipeline of giant data centre developments moving through planning and connection processes. These hyperscale centres can typically require 100–500 megawatts of power. Next-generation AI facilities are approaching 1 gigawatt. The eventual power demand could be considerably higher if all are approved.

It’s understandable consumers, policymakers and network planners are worried about whether electricity systems can keep pace.

But focusing on how much more energy is needed can be an error. It would be better to look at where new demand is emerging and focus on coordinating this demand with generation, storage and network investment.

Most big new data centre projects are planned for the outskirts of Melbourne and Sydney. But they don’t have to be built in cities.

An opportunity for regional Australia?

Australia has some of the world’s best solar and wind resources, along with enormous potential for energy storage.

But many renewable projects have to wait years for access to the grid. The new transmission lines essential for the renewable transition have faced long delays, opposition from some communities and planning uncertainty.

It would make sense to encourage new data centre projects to be built in regions with good renewable resources and tricky grid access.

This would mean renewable projects could launch without waiting for grid access in the knowledge they have a reliable customer. Data centre developers could benefit from cheap power. The power grid would benefit from reduced pressure, potentially avoiding the need for expensive network upgrades. And regional communities could benefit from investment and economic development.

A manufacturing plant often needs to be close to transport corridors, customers or raw materials. But these factors don’t matter to data centres, as long as they have access to high-quality internet connectivity, water and affordable and reliable power. Renewable projects would need to be supported by grid batteries, able to store power and release it steadily to keep the data centre running.

More than big energy consumers?

Data centres are often viewed as large electricity consumers that need power all the time. But this doesn’t have to be the case. They can be active participants in the energy system.

Many modern data centres are now designed with their own battery storage systems, and energy management platforms. Some computing tasks such as AI training can be set to run when power prices are low.

Increasingly, data centres are being paired with separate energy storage facilities such as grid-forming battery systems. These systems do more than simply provide backup power. They can keep electricity voltage and frequency stable, soak up power from renewables during peak output and reduce pressure on the grid during peak demand.

Combining data centres with grid-forming batteries makes energy demand more flexible. The data centres of the future could actively support the grid rather than simply consume power.

Looking ahead

To date, much of the debate over data centres and electricity has focused on how much power they will use.

It’s worth asking a more important question: where can we build them so they interact best with Australia’s energy system as it shifts from fossil fuels to renewables and storage?

Data centres are becoming essential infrastructure. If planned strategically, they could help unlock renewable energy development, strengthen regional economies and support the shift to a cleaner, more resilient electricity system.

It’s worth thinking about how data centres and renewables can work best together as an integrated ecosystem. The question is not whether data centres need too much power. It’s whether we are building the right energy ecosystem around them.

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

The Invisible 45%: Why Next Time Buyers Really Drive the Housing Cycle

By Richard Temlett, National Executive Director of Research and Nicolo Traverso, Data & Analytics Manager at Charter Keck Cramer

Housing commentary focuses too heavily on First Home Buyers and Investors. This is because they are easy to measure and politically visible. Charter Keck Cramer research shows that the more important cohort is the Next Time Buyer. These are existing homeowners who re-enter the market to move, resize, relocate, separate, recombine, improve lifestyle, change schools, respond to work flexibility, or trade up/down/across. Next Time Buyers are the engine of housing liquidity and a key lead indicator of supply. They determine how much established stock is released, how prices transmit between suburbs, dwelling types and price bands, and whether the market has enough depth to support sustainable price discovery.

Introduction

Every time the Reserve Bank of Australia changes the cash rate, every time a government announces a First Home Buyer or Investor grant, or every time a new apartment tower gets approved, all the commentary focuses on the same two groups - the Investor (chasing yields) or First Home Buyer (getting on the property ladder).

However, Charter Keck Cramer’s research shows that for the last 20+ years, the cohort that actually drives Australian housing is the Next Time Buyer. The Next Time Buyer is not chasing an opportunity. They are active because buying and selling a home is what a household does when life demands it.

This insight (which is the first in the series) draws on 20+ years of ABS data (loan commitments, building approvals, building commencements, building completions, prices and rents) to empirically prove that Next Time Buyers are not just the largest cohort. They are the transmission mechanism through which monetary policy, supply signals and price pressures propagate across every segment of the housing market.

This has important implications for government seeking to address the housing crisis. For developers and financiers seeking to understand the direction of the various markets and sub-markets. And every day Australians trying to understand what is happening in the housing market and what the government is trying to do about it.

Definitions

There are three main groups of buyers in the Australian housing market. They all have different roles.

Role of the Next Time Buyer

The first chart in this insight shows the proportion of First Time Buyers, Investors and Next Time Buyers across the Australian housing markets over the last 20+ years.

Since 2004, across every capital city, Next Time Buyers have held between 37.8% and 50.0% of the market (with an average of 44.9%). This is not a recent trend. This has been the structural reality through the GFC, through the APRA lending crackdown, through the COVID stimulus boom, and through the sharpest rate tightening cycle in a generation.

By way of contrast, the First Home Buyer share has swung from 12.8% to 30.6% whilst the Investor share has swung from 20.4% to 44.4%. These have been driven by the introduction and subsequent removal of various incentives for each cohort. As well as rate changes and lending changes aimed at these respective cohorts.

Proportion of Buyers – Australian Capital Cities

Charter Keck Cramer has also analysed the correlation between the various buyer cohorts and the approvals data. The second chart shows the correlation between Next Time Buyer activity and building approvals across the Australian housing markets over the last 20+ years.

The most important finding is that Next Time Buyers are the strongest and most immediate leading indicator of new dwelling approvals, and the effect is concentrated in houses rather than units.

Whilst we have not shared the other charts as part of this insight, the research also showed that First Home Buyers follow rather than lead the cycle. Additionally, First Home Buyer loan growth correlates most with house approvals two quarters later. This suggests their activity is driven more by affordability as well as incentive-driven timing, than by initiating new housing supply.

Finally, the research showed that Investors' relationship with unit approvals was more persistent than with houses. This is consistent with Investors buying into apartment and townhouse projects already in the pipeline, rather than initiating new detached-house approvals.

Next Time Buyers vs Approvals – Australian Capital Cities

Why is this relevant?

When a Next Time Buyer purchases, they often also list and sell their existing home. Put simply, they are critical to market liquidity.

When Next Time Buyers stop moving, the market can become illiquid. This may happen because of high interest rates, mortgage lock-in, stamp duty friction, uncertainty about prices, low confidence, lack of suitable stock to move into, construction delays or simply poor affordability.

By way of contrast, when Next Time Buyers become more active, the market usually experiences higher listing volumes, higher sales volumes, better price discovery, more auction activity, more competition in middle and upper price bands and greater transaction chains across the housing ladder. This can produce a healthier and more liquid market because buyers have more choice and sellers have more confidence.

At present Next Time Buyers have slowed down purchasing activity in many states and territories. The reasons for this do vary between the states and territories but the main factors have been summarised above.

This will translate into lower levels of future supply as well as lower pricing. Both are undesirable. Australia is already falling dramatically behind the Housing Accord dwelling targets, and the analysis suggests this is going to become even more pronounced over the next 12 months. Furthermore, new dwelling prices are linked to established house prices, and Charter Keck Cramer research shows that in many sub-markets established pricing needs to recalibrate upwards before new dwellings can be feasibly delivered to the market.

All industry participants need to regularly monitor the Next Time Buyer segment of the housing market. This metric is a critical lead indicator of where the market is heading over the next 6-12 months.  For the Federal and State Governments, attention needs to be paid to the various strategies to encourage the Next Time Buyer market to become more active. The number one change would be replacing stamp duty with a broad-based annual land tax. The Federal Government needs to assist the states with this transition as we have argued in previous insights. This is the first step towards improving liquidity, facilitating new pricing discovery, increasing the availability of stock and ultimately helping the market recalibrate.

This article has been republished with permission from Charter Keck Cramer. Read original.

Auction clearance rates are sliding. Here’s what can happen when a home doesn’t sell

By Kristle Romero Cortés, Associate Professor of Finance, Co-founder UNSW RISE Finance, UNSW Sydney and Mandeep Singh, Lecturer, University of Sydney

In Victoria and New South Wales, roughly one third of homes are sold at auction. Australia is one of very few countries in the world to regularly make use of auctions to sell homes – let alone “open outcry” auctions, where bidders compete with each other out loud in real time.

Auctions are known for this transparency, and there is a perception among many sellers they may get a higher price. But what about their risks – in particular, what happens if an auction fails?

Around the country, auction clearance rates have plunged to their lowest levels since the pandemic, continuing a downward trend that began as interest rates were pushed higher, even before major tax changes were announced in this year’s federal budget.

For buyers and sellers alike, what can research tell us about the upsides and risks of going to auction? And what can a failed auction mean for a property’s final selling price? Our recent research, based on 13 years of data from New South Wales and Victoria, showed just how much of a discount you might expect to see.

Australia’s love affair with auctions

If an Australian shared a story about successfully buying a home at auction with someone from the United States, the likely response would be: “Why did you buy a foreclosed home?”

That’s because in the US, auctions are primarily used as a last resort, such as when a lender takes control of a property.

So, how did Australia fall in love with auctions? Or, more specifically, Melbourne and Sydney, since these two capital cities dominate the auction market?

Part of the reason is historical. In early Melbourne, for example, auctions were used not only to sell parcels of land but also many other goods such as livestock. It was convenient for buyers and sellers to meet in one place.

But the enduring popularity of auctions suggests Australians must like something about them.

Transparency and pricing

For buyers, a key reason is that the auction process adds transparency to a negotiation in which it is often hard to know what to believe. Buyers get clearer information about who is interested in a property and what they’re willing to pay.

For sellers, auctions are also commonly thought of as a way to help achieve a higher price.

But our recent research shows the price premium from selling via auction (as opposed to via a private treaty sale) may be more modest than is sometimes conveyed in the media.

More likely, an auction campaign is convenient, especially for real estate agents who avoid continuous back and forth between prospective buyers and the seller on price negotiation. Of course, that is, if all goes well.

What if an auction fails?

Our research found that from 2007 to 2019, between 10%–40% of auctions failed in a given month in New South Wales and Victoria. What happened to those properties?

For sellers, it wasn’t good news. On average, properties that subsequently sold after failing at auction did so at a 1.3% discount, compared to the price our modelling estimates they’d have made if the seller had just chosen a private treaty in the first place.

Our findings suggest that when an auction fails, it creates stigma around a property. People become less interested in buying a property if they think other people believe something’s wrong with it.

We found the price effect of this stigma stemming from a failed auction lasted roughly 10 months, after which the price recovered.

Despite the common perception that auctions are significantly better than private treaty, we found that factoring in this risk of failure, auctions on average only yielded a price premium of 0.3% relative to the same property selling via a private treaty.

In any event, when a property is “passed in”, it provides a public dollar figure on what the sellers were hoping to achieve. This gives potential buyers a clear indication of where to start negotiating.

What about house prices?

Recent data from Domain suggests that an increasing number of sellers are withdrawing properties from auction as Australia’s property market cools.

Alternatively, due to increasing mortgage costs, we may see some sellers make their reserve prices more realistic, or at least meet the market by negotiating with the highest bidder in the case of a failed auction.

But it’s important to remember, falling auction clearance rates are only one marker of cooling demand in the housing market.

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

Changing who owns houses, won’t fix how fast we can build them

By Kavitha Vipulananda, University of Melbourne

Australia keeps reaching for tax reform to fix the housing crisis, but the 2026 Federal Budget still didn't tackle one of our biggest problems. What it missed was speed.

Australia has tried to solve its housing problem by changing who is allowed to own a home and on what terms.

The 2026 Federal Budget is the most ambitious version of that approach in a generation, and on its own terms, it passed. 

Negative gearing will be limited to new builds from 1 July 2027.  The 50 per cent capital gains tax discount will be replaced by cost base indexation and a 30 per cent minimum tax, effective from the same date.

A new $AUD2 billion Local Infrastructure Fund will help states deliver infrastructure that unlocks land for housing.

The Treasurer called it “the most significant transformation of the tax system in more than a quarter of a century”.

On the narrower question of who the housing market rewards, that claim is largely true. On the wider question of whether any of it will build more houses, the budget went quiet.

But Australia is not failing to build enough homes because we lack workers, demand or political attention.

Instead, we have quietly become much worse at building them.

The number of dwellings completed per hour worked has fallen 53 per cent since the mid-1990s, according to the Productivity Commission.

That is the structural problem under every headline about affordability, and it is the one problem this budget did not touch.

The distinction matters because changing ownership and building homes are two different things, and we keep treating them as if they are the same.

Construction isn’t happening at speed

The reforms in this budget are aimed at the demand and financing side.

They change who benefits from owning a home and how investment flows toward new supply rather than established stock.

These are reasonable goals and the shift away from subsidising competition for existing houses is overdue. None of it, however, makes a single home easier to build.

In Australia, the number of dwellings completed per hour worked has fallen 53 per cent since the mid-1990s. Picture: Unsplash

A tax incentive directed at new construction assumes the construction can happen at the speed and cost that Australia needs.

On current evidence, it cannot.

The government’s own forecasts concede the gap.

Dwelling investment is projected to rise four per cent in 2026-27, a figure that does not come close to the build rate required to meet the National Housing Accord target of 1.2 million homes by mid-2029.

We are currently on track to fall short by around 262,000 homes.

The budget improves the incentives to invest in homes that the sector still cannot deliver fast enough. Better terms for the people who want to invest.

Almost nothing for the firms that must build.

This matters because the cost of slow building is not paid by investors weighing their tax position. It is paid by the people already outside the system.

There are 43 per cent of low-income renters on Commonwealth Rent Assistance in rental stress, 254,571 households sit on social housing waitlists and one in three people who needed crisis accommodation last year were turned away.

None of these figures moves because negative gearing is restructured.

They move when homes are completed and completions are exactly what we have stopped doing well.

Changing the housing build rate

The fix is known, not speculative.

The evidence on modern methods of construction, including prefabricated, modular, robotic and 3D-printed buildings is now well established.

These methods compress timelines, reduce waste and lift output per worker, which is precisely the variable that has collapsed here.

The technology exists in Australia already. What is missing is the policy to move it from a niche to the mainstream, and a budget is the natural place to start.

Housing policy serious about supply, rather than only about incentives, would have funded the things that change the build rate.

This budget could have:

•    A national certification framework requiring all states to recognise certified prefabricated and modular homes, so a home approved in one jurisdiction is not re-litigated in the next.

•    A target of 30 per cent for modern methods of construction in Commonwealth-funded social and affordable housing by 2028, rising to 50 per cent by 2032.

•    Reform of construction financing so completed modular homes are valued on the same loan terms as traditional builds.

•    A commitment to restore social housing to six per cent of total stock by 2035, the share it held in the 1980s.

•    Investment in material substitutes for the inputs in shortest supply, like timber, so a single constrained material no longer stalls a build.

•    Support for sustainability measures that lower the carbon footprint of new homes without adding to their cost, so that building greener does not mean building fewer.

•    Faster and more consistent permit processes, so that approval delays stop adding months to every project before a single wall goes up.

None of these measures appeared.

The budget, like the housing policies before it, chose the lever that is easier to pull – tax – over the lever that is harder but more consequential – productivity and cost.

That is an understandable choice for a government with little money to spend. It is not a choice that builds houses.

Reforms aimed at ownership tend to reach the people who are already close to owning. This one is no exception.

It helps future first home buyers, an estimated 75,000 more of them over a decade, according to the government’s own numbers. It helps investors who can navigate a more complex tax regime.

It does comparatively little for the households already counted in the stress and waitlist figures, because changing the tax treatment of ownership does not put a roof over the heads of those without one.

Shelter is a human right

Until housing policy is willing to confront both how we build and who we leave out when building is too slow, the boldest tax reform in a generation will deliver a great deal of policy and not nearly enough housing.

Shelter is an internationally recognised human right.

Australia is failing on homelessness and affordability. We are also one of the few liberal democracies without a national Human Rights Act, which means the right to housing exists in our international commitments, but not in our federal law.

I would have built a different budget and a different kind of housing policy.

I would have backed middle-of-the-market investors and small businesses rather than taxing them harder, because they are what keep the economy turning.

I would have funded the things that actually shift the rate of construction.

Housing policy reveals its priorities in who it asks to pay, who it chooses to protect and what it is willing to fund.

This budget, I believe, chose wrongly on all three.

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

Global cost shock proves less severe than initially feared

By Oliver Nichols, Director of RLB in New South Wales

When conflict escalated in the Middle East earlier this year, concerns emerged that higher fuel prices, freight charges and material costs would place additional pressure on construction projects. While these pressures did emerge, the impact on Australia’s construction sector has been far more contained than initially anticipated.

Image: Macourt Media

According to Rider Levett Bucknall’s latest Construction Market Update, cost escalation continues to be driven primarily by domestic labour shortages, infrastructure demand and capacity constraints rather than geopolitical events alone. While the conflict has added between 1.5 and 3.5% to project costs in some sectors, the effect has been uneven and largely absorbed by the market.

“While the conflict created a short-term shock through fuel, freight and energy-linked inputs, domestic capacity constraints remain the dominant driver of construction cost escalation across Australia,” said Oliver Nichols, Director, Oceania Research & Development at Rider Levett Bucknall.

“The market has proven more resilient than many anticipated. Labour availability, contractor capacity and project pipelines continue to have a greater influence on pricing outcomes than global events alone.”

Click to read full report.

Initial shock eases

The outbreak of conflict triggered sharp increases in diesel, shipping and oil-linked construction inputs, creating uncertainty across the industry and shortening tender validity periods. Contractors and project teams responded quickly, adopting shorter price validity periods, earlier procurement strategies and risk-sharing contract structures to manage volatility and improve cost certainty.

However, many of the conditions that initially raised concerns have since moderated. Diesel prices have eased from their peak, shipping pressures have stabilised and several input surcharges have reduced, lowering immediate escalation risk across most capital city markets. As a result, tender pricing outcomes have remained more stable than anticipated, particularly in competitive markets where contractors have absorbed some of the increased costs rather than passing them directly to clients.

While the conflict has undoubtedly influenced construction costs, it has not triggered the sustained market-wide escalation many had anticipated at the start of the year.

Local conditions shape market outcomes

The impact of the conflict has differed across Australia depending on local demand conditions, labour availability and exposure to freight-sensitive inputs.

In Sydney and Melbourne, competitive market conditions have helped absorb much of the additional cost pressure. While fuel and logistics costs increased, strong competition for work and balanced workloads have limited the extent to which these increases have flowed through to tender pricing. As a result, both cities continue to experience some of the lowest escalation forecasts nationally.

Brisbane presents a different picture. Construction activity remains elevated across health, infrastructure and Olympic-related programs, creating strong demand for labour and resources. While the direct impact of the conflict has been relatively modest, any future increases in fuel, freight or material costs are likely to be amplified by existing capacity constraints and a substantial forward pipeline of work.

Perth and Adelaide continue to face similar challenges. In both markets, strong public sector investment, defence activity, infrastructure programs and constrained labour availability remain the primary drivers of escalation. Conflict-related cost increases have contributed additional pressure but are not the dominant factor influencing pricing outcomes.

Darwin remains the market most exposed to global supply chain disruption due to its reliance on imported materials and long-distance freight networks. Although recent stabilisation in diesel pricing has eased some immediate pressure, procurement uncertainty and logistics risks continue to influence project costs and planning decisions.

Across regional centres such as the Gold Coast and Townsville, escalating workloads, major government investment and preparation for future Olympic-related activity continue to place upward pressure on construction costs, reinforcing the influence of local market conditions over global events.

Structural pressures remain

While the immediate shock associated with the conflict has eased, the broader construction market remains under pressure from a range of structural factors.

Persistent skilled labour shortages continue to affect all major capital cities, while growing demand from infrastructure, defence and energy projects is placing further strain on available resources. The rapid expansion of data centre construction is also increasing competition for specialist trades, services contractors and electrical capacity.

At the same time, high levels of public sector work are challenging the feasibility of some private sector developments, particularly in markets where contractor availability is already constrained. Ongoing uncertainty in global energy and freight markets also remains a risk factor, even as immediate pressures have eased.

These underlying conditions mean Australia’s construction sector remains structurally constrained despite improving stability in international markets.

What the forecasts tell us

RLB forecasts construction costs to rise between 4 and 7% nationally during 2026, with stronger increases expected in Brisbane, Adelaide, Perth, Darwin, the Gold Coast and Townsville. Sydney, Melbourne and Canberra are forecast to experience comparatively lower rates of escalation.

Importantly, these forecasts reflect local capacity constraints and project demand more than geopolitical uncertainty. While global events can create short-term volatility, Australia’s construction markets continue to be shaped primarily by labour availability, infrastructure pipelines and competition for resources.

Looking ahead

Australia’s construction markets are expected to continue diverging based on local demand, labour availability and investment activity.

While the Middle East conflict contributed to a period of uncertainty and higher input costs, the sector has absorbed the impact more effectively than initially feared. Looking ahead, construction cost escalation is likely to be shaped primarily by domestic capacity constraints, particularly in infrastructure, defence, housing and data centre development, rather than geopolitical events alone.

For project owners and investors, the key challenge remains understanding the specific conditions affecting individual markets rather than relying on national averages. As recent months have demonstrated, local capacity constraints continue to have a greater influence on pricing outcomes than global headlines.

This article has been republished with permission from RLB. Read original or click through to the full report.

BUILT DIFFERENT: MODERN METHODS OF CONSTRUCTION

By CEDA and in partnership with Urbis

Danika Adams - Head of Research at the Committee for Economic Development of Australia (CEDA)

Jonathon Mahon - Economist at the Committee for Economic Development of Australia (CEDA)

Clinton Ostwald - Urbis Partner

Executive summary

Australia is not building enough homes, and the homes we do build are taking too long to complete. Projections point to a national shortfall of between 200,000 and 300,000 dwellings against the National Housing Accord target of 1.2 million new homes by 2029. Average construction times have risen 40 per cent since the pandemic. A new standalone home now takes 9.2 months to build. A new apartment building takes 2.4 years. 

Meeting Australia's housing needs will require building more and building differently. Modern methods of construction (MMC) encompass a range of construction approaches that move building activity, wholly or partially, away from the traditional on-site model. They can reduce construction times by 20 to 50 per cent, cutting two to five months from the average house build. At scale, they can cut construction costs by around 20 per cent. A 20 per cent saving would reduce the construction cost of an average apartment by more than $116,000. For a typical Sydney apartment building, it could lower construction costs by over $13.6 million. 

Despite these potential gains, modern methods of construction remain a niche part of Australia's construction sector. The barriers to uptake are mostly regulatory, though they also reflect the lack of industry scale, which in turn hinders uptake further. Australia's regulatory frameworks were designed for traditional on-site construction and create compliance complexity, cost and uncertainty for MMC projects. Financing structures tied to on-site progress milestones do not align with off-site manufacturing processes, limiting access to capital for buyers and producers alike. Fragmented development pipelines constrain the scale needed to make MMC commercially viable. State-based transport regulations add further cost and complexity. 

International experience shows that when modern methods of construction are embedded in national housing policy and supported by consistent regulation, stable demand and targeted investment, adoption can accelerate quickly. 

Without coordinated policy action, uptake will remain constrained. Realising MMC's potential in Australia requires reform across planning, building standards, financing and transport, alongside investment in workforce capability and pipeline certainty.

RECOMMENDATIONS

Set a national modern methods of construction target

1. The Federal Government should set a target for the delivery of MMC homes. Greater adoption in social and affordable housing should lead this target, building the demand certainty manufacturers need to invest at scale.

Examine and update the regulatory framework

2. The 'Modernising the National Construction Code' review should deliver concrete reforms to remove barriers to MMC. In parallel, the Australian Building Codes Board should publish nationally consistent MMC

definitions as formal guidance ahead of their incorporation into the National Construction Code.

3. State and territory governments should establish dedicated modern methods of construction approval

pathways.

Align finance with how modern methods of construction are built

4. The Federal Government should encourage standardised MMC finance products across the banking

sector.

5. State and Territory governments should consider low-interest finance for MMC manufacturing facilities.

Deliver a revised transport framework nationally

6. Transport Ministers, working through the National Transport Commission, should deliver harmonised permit and escort requirements for prefabricated module transport, through the next phase of Heavy Vehicle National Law reforms.

CONCLUSION

Modern methods of construction offer real opportunities to improve housing outcomes in Australia. The potential benefits are well established through faster construction, lower costs at scale, and a pathway to addressing the productivity decline that has affected the construction sector for decades.

The barriers to realising these benefits are commonly regulatory and financial. Regulatory frameworks built around traditional on-site construction create compliance complexity for projects that are constructed off-site. Financing structures tied to on-site milestones do not align with off-site manufacturing. Fragmented development pipelines make it difficult for manufacturers to invest at the scale needed to make the economics work. Overseas examples show that these barriers can be overcome, and that the benefits of doing so are substantial.

Modern methods of construction are not a silver bullet. But they are a tangible, evidence-based pathway to increase housing supply faster than traditional construction methods can deliver. The productivity time savings are measurable, and at scale, there could be real cost savings.

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

The cloud is made of concrete

By Dr M. Reza Hosseini, University of Melbourne

Artificial intelligence is no longer just a software tool. It has become the world’s most demanding construction client – with some concerning implications

In late 2024, a new building broke ground in Western Sydney that will draw more electricity than 140,000 homes – roughly the power demand for a mid-sized Australian town like Geelong.

But it’s not a power station, a hospital or a factory. It’s a building designed to run artificial intelligence (AI).

CDC Data Centres' new hyperscale campus in Western Sydney’s Marsden Park is set to become the Southern Hemisphere’s largest data centre.  And it is just one of hundreds under construction around the country.

For many years, digital tools have been changing the construction industry. AI has since brought about an unprecedented shift in how projects are conceived, delivered and managed.

It can optimise floor plans, catch design clashes in 3D models and reduce waste on site. And now, we are seeing something fundamentally different: AI has become the client.

The AI industry is the most capital-intensive, energy-hungry client the built environment has ever served. And the scale of this consumption is now quantifiable, rivalling the largest infrastructure projects ever built.

AI = Astronomical Increase

According to the Stanford AI Index 2026, global AI data centre power capacity grew from around 0.15 gigawatts in early 2022 to 29.56 gigawatts (GW) by the end of 2025 – that's a nearly-200-fold increase in under four years.

To put that in context, one gigawatt is enough to power 750,000 to a million homes and 29.56 GW is roughly equivalent to the peak electricity demand of the entire state of New York.

The Stargate project, a joint initiative between OpenAI, SoftBank and Oracle, carries a price tag of over US$100 billion for a single campus in Texas. That’s about twice the budget of Australia’s largest renewable energy project, Snowy 2.0.

And it's no longer only an offshore phenomenon.

Plans newly announced for Project Meridien, a one-gigawatt AI facility proposed on Karajarri country south of Broome, would put Australia in the same gigawatt class.

The consortium, in which the Karajarri Traditional Lands Association is a one-third partner, plans to start with around 240 megawatts from late 2029 and scale to a full gigawatt.

Notably, considering the sheer volume of consumption these centres create, this project aims to be powered by 90 per cent renewables and use a closed-loop cooling system that recycles water rather than consuming it.

Every one of these facilities has to be designed, engineered and built. That means construction jobs – and not in Silicon Valley, but here.

Is AI taking jobs or making them?

This is the part of the AI story that most people have not heard.

While the dominant narrative is that AI threatens jobs, the current wave of data centre construction is creating thousands of new roles.

In fact, research suggests that for every operational role at a data centre there are potentially 15 construction jobs created during the build phase.

Applied to Australia’s current pipeline, that translates to tens of thousands of roles: electricians, mechanical engineers, project managers, crane operators.

In Western Sydney alone, the pipeline expects to deliver around 6,000 construction jobs.

I have seen this first-hand.

On recent site visits to Hickory, one of Victoria’s major concrete manufacturers, the yard was covered with data centre elements – wall panels and structural pieces two to three times the size of anything produced for a standard commercial building.

The reinforcing bars are 75 millimetres in diameter. This is not a little bigger than normal. Bars this size are used for the enormous, concentrated loads found in the foundations of mega-skyscrapers like the Burj Khalifa in Dubai.

The building of these data centres is not business as usual for the construction industry. It is an entirely new category of work.

Are we ready for it?

There’s a lot of growth and development when it comes to construction for AI, and Australia has big plans for the future of the industry. But there is also tension.

Australia is short of construction workers.

Infrastructure Australia projects a peak shortage of 300,000 workers by mid-2027, and the Housing Industry Association estimates the country needs 83,000 more tradies just to meet the National Housing Accord target of 1.2 million new homes by 2029.

Data centres and housing draw from some of the same finite resources – particularly electrical trades, grid capacity and planning approvals.

In Sydney, local councils have raised concerns that the pace of data centre development is crowding out housing as well as straining water and power networks.

The National Growth Areas Alliance pointed out that the same councils expected to deliver 26 per cent of Australia’s new homes are also absorbing most of Sydney’s data centre pipeline.

The workforces are not identical.

Data centre construction demands highly specialised trades like high-voltage electricians, industrial cooling technicians and advanced mechanical engineers – jobs that only partly overlap with residential building.

But in a market already stretched thin, even partial overlap matters.

When a hyperscale project offers premium wages to secure electricians for 18 months, those workers are unavailable for housing.

So, it remains to be seen – can both of these targets exist in harmony?

For policymakers, the implication is planning reform that treats these pressures as connected rather than separate.

For the construction industry, it's an investment signal: the firms and workers who develop expertise in critical digital infrastructure will find no shortage of demand.

And for the broader community, it is worth knowing that the AI economy is not abstract or distant, with data floating above us in an imaginary cloud.

It is being poured in concrete, wired with copper and built by Australian trades right now.

This article has been republished from the Pursuit under Creative Commons license. Read original.

Three reasons why it pays to be an optimist as an investor

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

Key points

• The combination of the natural human tendency to focus on bad news, expectations rising beyond the ability of the economy to deliver, the increased availability of information & the rise of social media are likely magnifying perceptions around worries and making it easier to be gloomy. 

• However, to succeed as an investor it makes sense to err on the side of cautious optimism: otherwise, there is no point in investing; growth assets like shares have trended up over the long term; and trying to get the timing right of the 2 or 3 years out of 10 when they fall can be very hard.

“I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.” J.S. Mill
 

Introduction

In a recent Econosights my colleague Diana Mousina pointed out that much of the gloom and doom around Australia is overdone. This is not to say we don’t have issues – including poor housing affordability - or that we can’t do a better. But pessimism can feed on itself and lead to political – and notably populist – outcomes based on simplistically attractive notions that make any perceived problems far worse, not better.

But there is also another angle to this in that history tells us that succumbing to pessimism as investors doesn’t pay. Of course, this is often easier said the done. The “news” has always had a negative bent, but one could be forgiven for thinking it’s become even more so with constant stories of disasters, conflict, wrongdoing, grievance and loss. And the worry list for investors seems more threatening – with trade wars, social polarisation, rising geopolitical tensions and wars, alarm about climate change, talk of job loss from AI, higher public debt and higher inflation.
 

Four reasons why worries might seem more worrying

There is no denying there are things to worry about and that these may result in more constrained investment returns at some point. But four things may be combining to add to a greater sense of pessimism.

1. First, our brains are wired in a way that makes us natural receptors of bad news. Humans tend to suffer from a behavioural trait known as "loss aversion" in that a loss in say financial wealth is felt much more negatively than the positive impact of the same sized gain. This likely reflects the evolution of the human brain in the Pleistocene age when the key was to avoid being eaten by a sabre-toothed tiger or squashed by a wholly mammoth. This left the human brain risk averse and on guard for threats. Which in turn makes us more predisposed to bad news stories. Hence the old saying “bad news” sells. This is particularly true as bad news shows up as more dramatic (e.g. “billions wiped off shares”), whereas good news tends to be incremental (e.g. “shares rose 0.3% today”). Reports of a plane (or a share market) crash will generate far more clicks than reports of less plane crashes (or a gradual rise in the share market) ever will. This bias towards bad news means prognosticators of gloom are more likely to be revered as deep thinkers than optimists as observed by the philosopher and economist John Stuart Mill in the quote above.

2. Secondly, we are now exposed to more information than ever. It’s easier to check facts, analyse things and sound informed. But it’s often just noise. As Frank Zappa noted “Information is not knowledge, knowledge is not wisdom.” If we don't have a process to filter this extra information, we can suffer from information overload. This can be bad for investors as when faced with more information we can freeze up & make wrong decisions with our investments. Our natural “loss aversion” can combine with what is called the “recency bias” – that sees people give more weight to recent events – to see investors project recent bad news into the future and so sell after a fall. 

3. Thirdly, the explosion in social media is serving to amplify bad news. We are now bombarded with economic and financial news and opinions from apps, subscription services, finance updates, dedicated TV and online channels, chat rooms and social media. To get our attention news needs to be entertaining. And, following from our aversion to loss, in competing for our attention dramatic bad news trumps incremental good or balanced news in getting clicks. And the social media algorithms amplify extreme views. So naturally it seems the bad news is “badder” and the worries more worrying. Politics has added to this with politicians more polarised and more willing to scare voters. Just Google the words “the coming financial crisis” and you’ll find lots of references to a major disaster ahead. People have always been making gloomy predictions but prior to the information and social media explosion it was harder to be exposed to such stories. 

4. Finally, expectations have likely risen above the ability of the economy to keep up. My mother’s generation born in the 1930s saw depression, a world war and the regular death of siblings. Their expectations were low and it didn’t take much to make them happy in the 1950s (for my Mum it was holidays spent in a tent at the beach around a surf club). For them getting a consumer good like a car, fridge or washing machine generated a huge pay off in happiness. Today it’s very different. Consumer goods are ubiquitous and while smart devices come with great things they also come with a lot of bad (doomscrolling, bullying, a sense of missing out, amplification of grievance, etc) which can lead to agitation and dissatisfaction. We have lots more and live longer, but our expectations have increased beyond that. This makes it harder for the economy to deliver even if economic growth is good. This is consistent with studies on happiness that show that from low levels of income, extra income and the more things that come with it, can provide a big lift in happiness, but at higher levels extra income has little impact. This is not to deny issues around the cost of living or that we can’t do better by boosting productivity – but it suggests that even if the economy were to perform more strongly, we may not be any happier. As the next chart shows while GDP per capita has trended up happiness has fallen.

Source: World Happiness Report, ABS, AMP

The danger is that the combination of the ramp up in information and opinion, our natural inclination to zoom in on negative news along with expectations rising beyond the ability of the economy to deliver is making us gloomier and more pessimistic. It could also make us worse investors: more distracted, pessimistic, jittery and short term focused.
 

Three reasons to be optimistic as an investor

There are 3 good reasons to err on the side of optimism as an investor.

Firstly, without optimism there is not much point in investing. As the famed value investor Benjamin Graham pointed out: “To be an investor you must be a believer in a better tomorrow.” If you don’t believe the bank will look after your deposits, that most borrowers will pay back their debts, that most companies will see rising profits supporting a return to investors, that properties will earn rents, etc, there is no point investing.

Secondly, the history of share markets in developed well managed countries has been one of the triumph of optimists. Sure, share markets go through often lengthy bear markets – where pessimists look like winners - but the long-term trend has been up, underpinned by the desire of humans to find better ways of doing things resulting in real growth in living standards. This is indicated in the next chart which tracks the value of $100 invested in Australian shares, property, bonds and cash since 1900 with dividends, rents and interest reinvested along the way. Cash is safe and so fine if you are pessimistic but has low returns and that $100 will have only grown to around $16,000 today. Bonds are better and that $100 will have grown to around $50,000. Shares are volatile, but if you can look through that they will grow your wealth and that $100 will have grown to around $3.8 million. Residential property offers similar returns over the long term – although the line in the chart should be seen as indicative of the average return from property.

This is pre-tax & fees & is not impacted by Budget changes. Source: ASX, Bloomberg, RBA, AMP

This does not mean blind optimism where you get sucked into every investor mania. If an investment looks too good to be true and the crowd is piling in, then it probably is. So, the key is cautious, not blind, optimism.

Finally, even when it might pay to be pessimistic - and hence to get out of the market in corrections and bear markets - trying to get the timing right can be very hard. In hindsight many downswings like the GFC look inevitable and hence forecastable and so it’s natural to think you can anticipate them. But trying to time the market – in terms of both getting out ahead of the fall and back in for the recovery - is very hard. A good way to demonstrate this is with a comparison of returns if an investor is fully invested in shares versus missing out on the best (or worst) days. The next chart shows that, if you were fully invested in Australian shares from January 1995, you would have returned 9.4%pa (with dividends but not allowing for franking credits, tax and fees).

Covers Jan 1995 to early 2026. Source: Bloomberg, AMP

But if you were pessimistic about the outlook and managed to avoid the 10 worst days (yellow bars), you would have boosted your return to 12%pa. And if you avoided the 40 worst days, it would have been boosted to 16.5%pa! But this is very hard, and many investors only get really pessimistic and get out after the bad returns have occurred, just in time to miss some of the best days. For example, if by trying to time the market you miss the 10 best days (blue bars), the return falls to 7.5%pa. If you miss the 40 best days, it drops to just 3.7%pa.

Sure, on a day-to-day basis it’s around 50/50 as to whether shares will be up or down, but since 1900 shares in the US have had positive returns around seven years out of ten and in Australia it’s eight years out of ten.

Daily & mthly data from 1995, data for years & decades from 1900. Source: ASX, Bloomberg, AMP

Getting too hung up in pessimism on the next crisis that will, on the basis of history, drive the market down in two or three years out of ten may mean that you end up missing out on the seven or eight years out of ten when the share market rises.
 

“Choose to be optimistic, it feels better.” The Dalai Lama

This article has been republished with permission from AMP. Read original.

We can grow our way out of this building crisis

By Professor Dan Hill, University of Melbourne

Our built environment – everything human-made that surrounds us; our buildings, parks, infrastructure – is the single largest driver of global climate change, resource depletion, biodiversity loss and waste.

The built environment industry is optimised for productivity rather than working within our planetary boundaries, so in our attempts to achieve the Government’s current housing targets, research suggests that we will blow our entire carbon budget just on housing alone.

Yet the industry remains largely unreformed, with its impact on our fragile ecosystems just as problematic as the carbon. In trying to solve one problem, we create many more.

But productivity is not an end in itself – it is a means to an end.

The impacts and direction of building are what’s important, rather than sheer volume alone. Are we building sustainably? Equitably? Do these homes improve health or diminish it? Are we creating local jobs? Has construction increased or reduced biodiversity?

These questions largely come down to choices about building materials, and our latest report, Circle, suggests that we need a complete reorientation of the sector around ‘planet-aligned’ material choices.

In other words, we need to give the building industry a more meaningful sense of direction than simply ‘build baby build’.

Where does your building come from?

Project Circle uses a simple visualisation – a ‘spider diagram’, or ‘radar chart’, often used in sports metrics – to compare materials.

It conveys how some natural or bio-based materials might work well within planetary boundaries, assessing their performance in terms of emissions, impact on ecosystems, and potential reusability, while also evaluating them against current industrial realities of scale, speed, and durability.

The results show how little we have been considering our choice of materials.

Think about it – do you know where the building materials for your house come from?

The clothes you’re wearing almost certainly have a little tag indicating their provenance – yet in most cases, people have little idea about this most fundamental aspect of the houses they live in.

Materials existed before the building and will continue to exist afterwards. The building itself is just a frozen moment in which those materials are assembled in a certain way.

It’s those material flows that can indicate how sustainable (or not) a building might be.

Whenever you make a building, you can imagine a ‘hole’ appearing somewhere else – really, many holes – representing those materials being extracted.

These largely opaque processes can be positive or negative for environments, but little of this impact is understood, and very little of it is legislated in Australia.

If your building is comprised of mainstream materials, like concrete, steel, brick and glass, their impact is typically highly damaging.

Even a potentially ‘planet-aligned’ material like timber is often imported into Australia – despite our capacity for forestry – with half routinely failing traceability testing about its origins.

Mainstream practice in design and construction has largely stopped thinking about materials in any meaningful way, leaving all those upstream impacts out of sight, out of mind.

But there is an alternative.

The alternative

Project Circle, led by me and colleagues Dr Chris Jensen and André Bonnice, highlights ‘planet-aligned’ materials – hemp, straw, timber, stone and earth – which perform strongly in their potential for circularity, their production emissions, and their ecological impact, especially when locally sourced and responsibly managed.

These materials aren’t new. But when we compare them to the volumes of mainstream construction materials used, they simply aren’t making a big enough dent in the industry.

The inconvenient truth is that focusing on productivity, efficiency, and scale without considering materials will only make things worse, more quickly.

The Hyllie building in Malmö, Sweden, during construction. It features straw panels within a timber core, boasting a mighty 12 storeys. Picture: Herbert Gruber/asbn

Instead, the sector must reorient rapidly around circular and natural materials.

There is a rich and diverse palette of viable regenerative materials, full of possibility, and they are ready to be deployed – as long as we’re willing to be inventive.

Reimagined potential

In the fable of the Three Little Pigs, houses of straw and sticks were no match for the Big Bad Wolf. But we’ve come a long way since then.

A new building in Malmö, Sweden, built from timber and hi-tech compressed straw cassettes, boasts a mighty 12 storeys and recently, Danish schools have been built using thatched facades from local straw – so it seems that old fable may need updating in line with contemporary building technologies.

Then there’s a low-emissions Stone Demonstrator in London and beautiful French social housing projects built with rammed earth recovered from excavations of the nearby Paris Metro.

These materials are ancient, but are used in modern ways and often hiding in plain sight. And they prove that they’re capable of much larger projects than we thought.

For instance, Australia is one of the largest per-capita wheat straw producers, yet much of that straw is burned.

If around 5 per cent could be diverted into making new construction materials, that straw could build an estimated 100,000 homes per year. We might simply need to reimagine its potential, using both new and old technologies.

Green House, Blue House, Aqua House

Making these circular buildings tangible in Australia is integral to achieving the necessary changes in the industry.

That’s why our research developed plans for three prototypes – the Green House, Blue House and Aqua House – to do just that.

The Green House explores grown materials like straw and timber, the Blue House reuses old materials like concrete panels and salvaged timber, and the Aqua House embraces stone as a crucial, low-emissions alternative.

These model prototype buildings show how circular materials might underpin a regenerative construction sector. And importantly, one that has the potential to scale.

Currently, making buildings is a highly destructive process.

But what would it mean to say that to build is to grow? Or to regenerate? That a building might make our shared soils healthier, our air and water cleaner?

What if building could be closer to farming than mining, architecture closer to agriculture?

Getting there will require rethinking much of what the industry currently takes for granted, but our research makes it clear how exciting and truly valuable the shared outcomes could be.

The ‘dark matter’ hurdle

Research is clear-eyed about what stands in the way.

Material choices don’t happen in a vacuum – they are shaped by what we call the dark matter of regulation, policy and finance.

Designing new public policy and creating demand through public procurement isn’t easy, but we have some great examples globally.

France has passed laws mandating that every new public building must be 50 per cent timber or equivalent. Denmark has put a ceiling on embodied emissions in its building code, preferencing low carbon materials.

It’s time for Australia to follow suit and embrace the abundance of circular and low-emissions materials at our disposal.

This atticle has been republished under Creative Commons license. Read original here.

Struggling to find an electrician or builder? 5 reasons for Australia’s tradie shortage

By Pi-Shen Seet, Professor of Entrepreneurship and Innovation, Edith Cowan University and Janice Jones, Associate Professor, College of Business, Government and Law, Flinders University

Have you recently tried to call a tradie for repairs or a renovation and had trouble finding one?

As the federal budget once again focuses on boosting housing supply, one critical issue keeps resurfacing. Australia does not have enough skilled tradespeople to fix and renovate existing homes, let alone build the new homes being promised.

This week’s budget promised some measures to address these issues, including

• A$75.1 million over four years from 2026–27 for a new trade skills assessment system

• $5.6 million over three years from 2026–27 for a new program to recognise skills of people who trained in a trade overseas but aren’t in Australia on a skilled visa (they might, for instance, be here on a different type of visa).

This will help overseas trained tradies get licensed quicker and working in Australia.

The Housing Industry Association lobby group has welcomed this, but also flagged concerns about cuts to programs aimed at encouraging employers to hire apprentices.

And even with extra overseas-trained tradies getting licensed here, the problems are so longstanding it will take some time to make even a small dent in the shortage.

Electricians, plumbers, carpenters and other construction trades will remain hard to find. If you’re trying to build, that often means longer waits and higher costs.

Industry groups estimate Australia will need around 116,700 additional construction workers to meet the government’s target of building 1.2 million new homes over five years.

So how did we get here and what are the factors driving the tradie shortage?

Pixabay

1. Young Australians are not attracted to the building trades

For too long, apprenticeships – and vocational education and training in general – have been seen as less important than school subjects that lead to university.

Teachers, careers advisers, parents and members of the media often present post-school academic pathways to university as more valuable. One reason is that many of these people have never done an apprenticeship themselves.

The jobs connected to apprenticeships are often viewed as low status, and as involving more demanding physical or manual work.

Employers have not helped this image issue by insisting on low pay for apprentices while training.

We’ve seen efforts at short-term fixes, such as the federal government’s recent move to double incentive payments to $10,000 for eligible housing construction apprentices.

However, we still aren’t getting enough young people taking up apprenticeships.

And this week’s budget featured changes to measures that aim to incentivise employers to take on apprentices. Housing Industry Australia has said it’s concerned that

incentives are now limited to small and medium sized enterprises and Group Training Organisations. Large residential building employers will no longer be eligible for direct apprentice incentives […] reducing incentives risks discouraging apprentice uptake, particularly for employers already training at scale.

2. Too many apprentices are still dropping out

Another major ongoing problem is apprentice attrition.

Yes, recent data shows completion rates for trade apprenticeships have improved in construction. But too many apprentices still leave before qualifying.

The reasons are often less about the training itself, and more about low pay, poor working conditions and negative workplace experiences.

Research suggests improving workplace conditions may be crucial to reducing attrition.

3. Overseas skills are not being recognised quickly enough

Industry and policy groups have long criticised Australia’s slow and costly processes for recognising overseas trade qualifications.

Evidence suggests only a very small share of recent migrants are working in residential construction.

A key issue is that skilled trades are heavily regulated and require formal licensing, gap training and assessment against Australian standards.

Yes, this week’s budget does promise $85.2 million over four years to get migrant tradies working on job sites sooner.

This week’s budget promised measures aimed at getting more overseas trained tradies licensed. Federal Budget 2026.

But this will take some time to make a difference. And with net overseas migration expected to fall in Australia in the next few years, it’s clear this won’t be a silver bullet for the tradie shortage.

4. Skilled workers are being attracted to other industries

Another challenge is retaining tradespeople in the residential construction sector as their skills are also sought elsewhere.

During Australia’s mining construction boom, many tradespeople were lured into the mining sector. Mining isn’t what it was 15 years ago, but mining firms continue to offer high salaries and attractive conditions to people who might otherwise be tradies in housing construction.

Demand for skilled tradespeople is also high in other infrastructure projects, such as transport and communications projects.

A boom in construction of data centres is also wooing many tradies away from residential building.

This is especially true for electricians, air conditioning technicians and telecommunications installers.

5. Many can’t find housing in regional and rural Australia

The shortage in tradespeople is affecting some parts of Australia more than others.

In many rural and regional communities, many tradespeople struggle to find affordable housing close to work.

This makes it harder to attract and retain workers outside major cities.

A large pipeline of renewable energy and transmission line projects in the regions is also straining local labour pools in regional areas, luring tradespeople away from residential work.

These shortages become especially clear after disasters such as floods or cyclones; repairs are often slow, in part due to difficulties in finding tradespeople.

We can’t fix housing without more tradies

The factors affecting the shortage of tradespeople are interrelated and complex.

It will take an innovative, ambitious, whole-of-system approach – involving all levels of government, industry, educators and training providers – to correct these trends.

Until then, Australia simply won’t have the tradies it needs to build the homes it wants.

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

We've forgotten how to build houses

By Kavitha Vipulananda, University of Melbourne

Construction productivity in Australian has fallen 53 per cent since the mid-1990s. Modern methods of building can reverse it, if we choose to scale them

Australia is not failing to build enough homes because we lack the workers, the demand or the political attention. We are failing to build enough homes because we have quietly become much worse at building them.

The Productivity Commission's research paper, Housing construction productivity: Can we fix it? found that the number of dwellings completed per hour worked has fallen by 53 per cent since 1994-95.

Australia has become quietly worse at building houses. Brett Rogers/Pexels

Even after adjusting for the fact that homes are now larger and higher quality than they were 30 years ago, labour productivity in the sector has still gone backwards by 12 per cent over the same period. And across the broader economy, labour productivity rose 49 per cent.

To put that gap in perspective, had the wider economy declined as sharply as housing construction, average Australian incomes would be around 41 per cent lower than they are today.

That is the structural problem hiding underneath every headline about housing affordability.

It is also why the country is on track to fall around 262,000 homes short of the 1.2 million national target by mid-2029, even with a National Housing Accord in place and significant funding behind it.

The human consequences are already visible.

According to Australia’s Productivity Commission 2026 Report on Government Services, 43 per cent of low-income renters receiving Commonwealth Rent Assistance are still in rental stress. Mission Australia reports 254,571 households on social housing waitlists, with 122,457 in greatest need on priority lists, a 12 per cent annual increase.

One in three people who needed crisis accommodation last year were turned away because there was nowhere to send them.

A new mortgage holder now spends 50 per cent of their income on housing. Tenants spend 33 per cent. Saving a deposit takes more than 10.6 years.

These are not market fluctuations. They are the downstream effects of a construction sector that has not modernised at the pace the country needs.

The technology to fix this already exists

The Productivity Commission found that traditional builds can take up to 12 months, while prefabricated builds can be finished in around 16 weeks.

Queensland's QBuild Modern Methods of Construction program is using modular techniques to deliver social and affordable housing at scale.

Australia is on track to fall around 262,000 homes short of the 1.2 million national housing target. Jakub Pabis/Pexels

In February 2025, robotics and 3D printing technology company, LUYTEN, completed Australia's first multi-storey 3D-printed house in outer Melbourne.

The build took five weeks. A traditional build would have taken eight to eleven months.

FBR Limited, an Australian robotics company, has developed bricklaying robots that work consistently, safely and faster than human teams. In Western Australia, another company, Contec, is using 3D concrete printing to build homes in days rather than months.

Australian innovation in this space is genuinely world class. What is missing is the policy architecture to scale it.

Modular construction accounts for less than five per cent of Australia's total building output.

The barriers are well understood: regulatory complexity across States, financing systems that treat modular homes differently from traditional builds, and an industry structure dominated by small firms that struggle to invest in innovation.

Research from the Committee for Economic Development of Australia (CEDA) found that Australian construction firms with 200 or more employees generate 86 per cent more revenue per worker than firms with five to 19 employees.

If Australian construction matched the firm size distribution of manufacturing, the industry would produce AUD$54 billion more revenue per year without a single additional worker.

That is the equivalent of gaining 150,000 construction workers in a sector currently struggling for labour.

Every one of these barriers has been solved somewhere else.

New Zealand's Auckland Unitary Plan upzoned three-quarters of residential land in 2016 and roughly doubled annual dwelling approvals within six years, with rents on three-bedroom homes 26 to 33 per cent lower than they would otherwise have been.

Singapore's Housing and Development Board has around 80 per cent of the population in publicly built homes, at a scale and speed Australia has not seen since the 1950s.

Four practical reforms could change this picture

Currently, a manufacturer in Melbourne has to re-certify its product simply to sell it in Brisbane – an unnecessary duplication of time and cost.

So, an obvious first step to fix this would be completing the national certification framework for prefabricated and modular construction, which is being developed by the Australian Building Codes Board. This would require all States to recognise certified modules for streamlined approval.

Secondly, set a 30 per cent target for modern methods of construction in all Commonwealth-funded social and affordable housing by 2028, rising to 50 per cent by 2032. Public procurement at this scale gives manufacturers the price stability and pipeline confidence they need to invest.

Third, reform construction financing so that banks and lenders treat completed modular homes on the same valuation and loan terms as traditional builds.

The current settings effectively penalise the technology that can solve the supply problem.

And finally, restore social housing to six per cent of total stock by 2035, returning it to the levels of the 1980s. The National Housing Supply and Affordability Council has identified this as the medium-term target needed to bring the system back into balance.

None of this is radical. Each lever has been tested somewhere, by someone, and the evidence is published.

The opportunity now is to bring these reforms together, rather than treating them as separate workstreams.

The housing shortfall is here, not somewhere in the future.

Treating it as a productivity challenge, rather than purely an economic one, opens up reforms that are evidence-based, already tested and within reach if there is the political will to act on them.

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

The critical role of the valuer in the age of digital valuations

by Carl Pinto, General Manager of Banking & Valuation Solutions - Cotality AU/NZ

Introduction

From default to exception

The physical inspection has defined Australian residential valuation for generations, serving as both the primary instrument of evidence gathering and the foundation on which the valuer's professional credibility rested.

However, digital innovation has dramatically impacted the industry, moving it toward a hybrid model over the past three to four years, with the physical inspection transitioning from a professional obligation to a considered judgment call.

The change has not impacted the standard of the assessment or the qualifications of the person making it, but how the entire industry gathers, validates and applies evidence.

Australia's residential property market is valued at more than $12 trillion, with mortgage brokers facilitating more than 77 per cent of new residential lending. In a market where lenders compete intensely for the same borrowers, speed of approval has become a primary point of difference. The valuation, historically one of the most time-consuming steps between application and approval, lies at the centre of that process and has therefore been the focus of the most significant operational change.

Advances in data infrastructure, aerial imagery, planning overlays, hazard mapping, and verified homeowner-submitted photography have expanded what a qualified valuer can determine without visiting a property. For most standard residential mortgage valuations, the quality and currency of that digital evidence is sufficient to support an accurate, defensible assessment, without the time and cost of a physical inspection.

The updated International Valuation Standards (IVS), effective January 2025, reinforced that sufficient investigation is achievable through inquiry, research, and analysis rather than physical inspection alone, affirming best practice for all assessment types and the due diligence required of each. The physical inspection remains one valid method among several.

The method of investigation has changed fundamentally, but the professional judgment and experience required to interpret that evidence and stand behind a defensible opinion of value has not.

This report examines how the profession is responding to the changes, what the industry's governing bodies are doing to support businesses, and why the digital evolution of residential valuation is an opportunity for growth.

01

Due diligence in a digital age

The full inspection is transitioning from the default to the exception. The expert-led digital assessment is becoming the primary product across valuer-driven, residential mortgage valuations, with major lenders building their credit workflows around it and multiple valuation firms operating at scale within it.

A valuer completing a digital assessment works across aerial and satellite imagery updated at a frequency that would have been commercially unthinkable a decade ago, cross-referenced against listing imagery, planning overlays, zoning data, hazard data, and easements. ValConnect, Cotality's valuation fulfilment platform for Cotality Desktop and SMARTval, provides valuers with access to sales histories, comparable evidence, building insurance estimates, summation calculators, and risk flags within a single workflow. Where additional verification is required, secure, geo-tagged and time-stamped photographs add a verified, real-time layer of property condition data.

For adoption to reach its current scale, the confidence of the industry's risk and insurance frameworks was also required for legitimacy. Professional indemnity insurance had traditionally been the preserve of valuations completed with a full physical inspection, reflecting the view that a valuer's accountability was tied to their physical presence at the property.

PI insurers are now supportive of hybrid assessments, extending cover to digital workflows and enabling their use in higher risk profile settings that would previously have required a valuer on site. This represents the insurance industry’s formal acknowledgment that a qualified valuer applying professional judgment to a comprehensive digital evidence base carries comparable professional accountability.

Lenders Mortgage Insurance providers have similarly incorporated hybrid assessments into their approved services. Their acceptance of hybrid assessments signals the risk frameworks underpinning Australia's residential lending market have been satisfied that digital assessment is a credible basis for credit decisions involving higher loan to value ratios.

These risk approvals have been as significant to wider adoption as advances in data infrastructure, confirming to lenders, valuers, and the broader market that the professional and financial accountability behind a hybrid assessment is as credible as a traditional valuation.

Tim Frazer, Director of Quality and Risk Management at CBRE Valuation and Advisory Services, identifies COVID as the initial turning point, when necessity drove acceptance of alternative inspection methods and confidence has grown steadily as data quality improved since.

Frazer says the integrity of a digital assessment rests on transparency around data sources, clear articulation of the valuer's rationale, and appropriate escalation where the data is insufficient.

"Transparency around data sources, validation of information relied on, and accuracy of the assessment are critical to supporting informed decision making."

"There is growing demand to collate and incorporate additional data sets, such as energy efficiency and dwelling performance, as part of the broader risk and suitability assessment."

02

How firms are responding

As one of Australia's largest residential valuation providers, Opteon has been at the forefront of the digital transition, reshaping its operations to meet the demands of a faster, data-driven market.

Scott Chapman, Opteon's Managing Director for Australia and New Zealand, says appetite for traditional mortgage valuations still exists, however digital workflows make it possible to meet the growing volume at a scale and speed the old model could not sustain.

"Digital workflows now let us meet that demand at a scale and speed the old model simply couldn't sustain," he says.

Where a valuer's week was once structured around driving schedules and site appointments, for many it is currently built around data analysis, report synthesis, and managing a higher volume of instructions with greater consistency.

Chapman says the ability to synthesise evidence across multiple data sources and write a defensible report without visiting a property is a skill the modern mortgage valuer must have.

Opteon estimates that around 15 per cent of residential mortgage instructions involving a valuer are completed digitally, with site visits reserved for properties where complexity or risk requires professional judgment on the ground. That includes unusual configurations, significant renovations, or cases where data cannot be reliably sourced remotely.

"We're not trying to eliminate the site visit. We're being deliberate about when it's actually necessary,” he says.

“Think about how telehealth has changed access to medical services. It didn't replace the doctor; it made the system smarter about when you need one in the room. That's the same logic we're applying. When we send a valuer on site, the risk profile justifies it. In those cases, the physical inspection is non-negotiable. It just doesn't need to happen for every instruction."

Australia’s largest valuation and advisory firm, Herron Todd White, has built a hybrid model that combines physical inspections with smart digital assessment capability.

Drew Hendrey, Managing Director of Herron Todd White’s residential division says the innovation, on the back of 58 years of experience, has broadened rather than narrowed the firm's scope of work, enabling greater participation in high-volume and portfolio-based engagements and extending reach into regional and remote markets using prior inspection records and rich property datasets.

"Digital assessments have not replaced traditional methods by any means. It has helped complement them," he says.

For Hendrey, professional excellence in this environment is defined by the ability to hold both capabilities simultaneously and Herron Todd White continues to seek out local experts to offer truly national coverage, which supports the firm’s ethos backed by decades of experience across every postcode in Australia. 

"Professional excellence means leveraging and blending significant source data with professional judgement to deliver high standards of accuracy and quality alongside faster turnaround times."

However, as digital assessments grow as a proportion of total valuation work, Hendrey asks whether the volume of verified, first-hand data points that feed those assessments will keep pace.

"Fewer physical inspections means fewer verified, first-hand data points for valuers to rely on when completing digital assessments. It also reduces exposure to local markets, with the potential to erode institutional knowledge and create gaps in the development of future valuers."

03

Where the profession is heading

Australian Property Institute CEO John Winter says the updated IVS has been broadly welcomed, with Australian members largely already operating at the standard the update reinforced.

He said what the update did well was acknowledge the evolving complexity of valuation work, ESG considerations, data-driven approaches, and the increasing importance of transparency in methodology.

The API's new quarterly Australian Property Market Outlook, which surveyed more than 360 practising professionals on a range of topics, illustrates what that complexity looks like in practice.

In the Q1 2026 report, valuers identified more than 20 factors driving residential property prices, from construction costs and interest rate settings through to planning approval delays and job market conditions.

"That ability to dynamically assess how those variables interact in a specific market, at a specific point in time, for a specific property, that's what a qualified valuer brings,” Winter says.

“A valuer in Perth is weighing mining-driven demand and constrained supply; a valuer in Sydney is weighing rate hike impacts and softening confidence. The data inputs might overlap, but the judgement applied is entirely different."

04

A profession that remains essential

The valuation industry is not standing still in the face of this transition. Digital workflows have created capacity the road-based model could never have sustained at current mortgage market volumes, and the firms investing in hybrid workforces, data capability, and digital delivery are handling more instructions with greater consistency than at any previous point.

Through all of it, the professional judgment required to interpret evidence, weigh it against market conditions, and stand behind a defensible opinion with a qualified name and PI insurance attached remains what it has always been. However, while the tools may have changed, the professional standards have not.

Valuers who proactively engage with the changes will define what professional excellence looks like in the decade ahead.

This report accompanies a hosted industry panel led by Carl Pinto, General Manager of Banking & Valuation Solutions - Cotality AU/NZ, at the Australian Property Institute’s National Property Conference in May. The panel will bring together leading voices from across the profession to continue the conversation on standards, skills, and the next evolution of Australian residential valuation. We hope you will join us.

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

Tax Reforms to future-proof Australia’s Housing Market

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. 

There is real merit in making changes to the Capital Gains Tax (CGT) discount and Negative Gearing in Australia.

Given we have a national housing crisis, this debate needs to include the State and Territory Governments, and it is essential to also bring Stamp Duty, Land Tax and the various Foreign Investor Taxes & Charges into this discussion as all these taxes and charges are interrelated with each other.

Any changes need to have an evidence base, be properly explained to the public, protect the vulnerable, be phased in to avoid significant market distortions and must encourage new dwelling supply.

—————————————————————————————————

There has been a large amount of recent commentary about the potential changes to the Capital Gains Tax (CGT) and Negative Gearing that may be announced at the Federal Budget next month.

Charter Keck Cramer’s view is that this is a debate which deserves the fullest possible analysis — one that goes beyond changes to CGT or Negative Gearing at the Federal level and also examines the critical role that Stamp Duty and Land Tax reforms at the State and Territory level could play. These are deeply interconnected parts of the same system, and a comprehensive public conversation about all of them is both timely and necessary.

It is amazing to reflect that in 2019 the Labour Government proposed changes to CGT and Negative Gearing and it was a major reason for their election loss. These reforms were, and still are, incredibly politically sensitive.  In 2026 the Labour Government is proposing similar changes to GCT and Negative Gearing and Charter Keck Cramer’s view is that it is highly likely that they will be made in May this year.

Much of this change in sentiment is driven by the change in the dynamics of the voter base. This has started to play out at the State level with various Governments attempting to make dramatic planning system changes to address the supply-side issues that previous Governments on both sides of the political divide have ignored for the last 20 years.

Charter Keck Cramer’s views are that we are at a seminal moment in time where we need to have a well-informed debate about the merits of these tax changes.  This insight endeavours to start this discussion.

Key Concepts and Statistics

There are a number of key concepts and statistics that need to be explored to enable us as voters, as homeowners or renters, as parents and grandparents or as children and grandchildren to form a balanced view of the merits of some of these changes.

Some of these are summarised in this section of the article.

1.1 Taxes and Charges

Source: Treasury & Parliamentary Budget Office Estimates, ABS Tax Statistics, Budget Papers (various), Charter Keck Cramer.
NOTE: some of these figures are best estimates based on the documents and reports reviewed and used by the various levels of Government.

Our readers need to be aware that Australia has one of the most generous GCT and negative gearing systems in the world. Our research shows that countries that also offer various forms of CGT discounts include the USA, the UK, Canda and Japan whilst countries that also offer various forms of negative gearing concessions include Germany, Canada, Japan and Norway.

1.2 New vs Established Dwellings

On average, approx. 85-90% of investors purchase established dwellings in Australia whilst approx. 10-15% purchase new dwellings. This is a structural pattern rather than cyclical when the long-term averages are analysed. These figures are higher for high density apartments in various locations across our Capital Cities where investors comprise closer to approx. 30-50% of new dwellings.

Research shows that Foreign Investors represent approx. 2% to 3% of the total transactions each year (this peaked at 3% to 4% in the mid-2010s). Importantly though, Foreign Investors often account for approx. 30% - 40% of new dwellings each year in Australia which underscores their critical role in new housing supply.

1.3 Impact on Prices and Rents

There have been various studies carried out to show that there will in fact be a nominal impact on prices and rents of existing dwellings should the CGT or Negative Gearing settings be changed. These studies show that the impact to prices over the medium term will be an approx. decrease of -1% to -5% whilst to rents over the medium term it will be approx. increase of 1% to 4%.

This of course comes down to how the settings are changed but the public need not necessarily fear that prices of their existing homes will dramatically fall or that investors will completely exit the housing market and rents dramatically increase.

1.4 Current Changing Voter Base

The table below sets out a summary of the changing voter base across Australia.

At the time of the next Federal Election in 2028 approx. 38% - 40% of the voter base will comprise Gen Z and Millennials. Many of these voters will be renters and are at the coal face of the housing and costs of living crisis.

This shift from the Baby Boomer and Gen X voter base to the younger cohorts is a primary reason why Charter Keck Cramer has confidence that the next decade will see significant reforms which will be in response to a deeply dissatisfied, and now significant proportion, of the voter base who are not getting their needs met though the housing system.

Major Problems that aren’t going away

In 2026 we have a tax system that is badly out of date and simply not fit for purpose. Analysis of everyday Australians shows that almost every participant in the industry now has problems and none of these households are in fact being provided with the appropriate housing that meets their needs.

Younger generations are locked out of the housing market and are deeply dissatisfied that they are not being afforded the same opportunities as their parents and grandparents. At the other end of the spectrum are the older generations who are not able to downsize and age in place in appropriate forms of housing, nor are they able to live close to their children and grandchildren. Finally, they are also extremely worried about their inheritance and how that is going to be impacted by the current tax system.

Finally, we now have several State Governments who are deeply in debt and are not able to raise reliable forms of revenue on a consistent basis to assist with budget repair or assist the development industry will delivering new forms of housing supply.

The major culprit is of course Stamp Duty. This is one of the most inefficient taxes and distorts markets and buyer behaviour. It is also dependant on the property cycle, relies on transactions and is hence volatile.

By way of contrast, research shows that Land Tax is one of the most efficient taxes and not subject to the volatility of Stamp Duty. This is because it is levied on the value of the underlying land value of a property and not reliant on transactions or market turnover.

Finally, CGT and Negative Gearing benefit higher income households the most. This is because the benefits increase with marginal tax rates. The research also shows that these two tax concessions do encourage investors to bid up the prices of established dwellings often at the expense of first-home buyers.

Ideas for win-wins

As identified above, Charter Keck Cramer’s views are that over the next decade Australia will see dramatic reforms as the deeply dissatisfied voter base seek solutions and leadership from the officials they have elected. All sides of politics need to take heed of the major swings given the deeply dissatisfied segments of the voter market.

What are the numbers?

Our research shows that broadly, the total value of the unimproved residential land in Australia is approx. $7.7T.

Our high-level calculations show that a broad-based annual Land Tax applied to all residential property across Australia could raise approx. $38.5B to $57.8B per year. This is based on a 0.5% or 0.75% annual tax rate on the estimated $7.7T value of unimproved residential land in Australia.

The table below sets out a summary of the current numbers as they relate to housing in Australia. We have included the proposed numbers for an annual Land Tax for the sake of comparison.

Land Tax for the sake of comparison.

Source: Treasury & Parliamentary Budget Office Estimates, ABS Tax Statistics, Budget Papers (various), Charter Keck Cramer.
NOTE: some of these figures are best estimates based on the documents and reports reviewed and used by the various levels of Government.

Whilst Stamp Duty is a significant source of revenue for the States and Territories, it is important to understand that a broad-based annual Land Tax could in fact replace this source of revenue. Subject to the various changes that could be made, the revenue that could potentially be raised from these reforms could be used for various solutions which include:

1. Broader tax reform.

2. Infrastructure delivery.

3. Social and affordable housing delivery.

4. Budget repair.

5. Subsiding the costs of delivery to make new housing feasible.

What are the non-negotiables?

Any changes need to be designed so as to avoid crashing the markets. They don’t need to be blunt but rather stepped changes, grandfathered and better targeted to achieving the goals of new housing supply.  For example, negative gearing could be restricted to new housing supply and this could be paired with supply-side incentives which encourages net housing additions.

Governments must not do anything to negatively impact new supply at this point in the cycle. This will undermine the National Housing Accord targets further. In fact, there is an argument that at this point in the cycle, and to offset the dramatic increase in the costs of delivery, the incentives could be increased to stimulate new housing supply.

Government must also not do anything with retrospective changes as this undermines trust. Finally, Government must be aware of “double taxation” for various transactions that have already occurred.

Replacing Stamp Duty with Land Tax – A pragmatic idea that works

A major idea that ought to be fully explored is for the Federal Government to work with the States and Territories to replace Stamp Duty with a broad-based annual Land Tax. To do this, both the CGT and Negative Gearing could be reformed with the revenue from GCT and Negative gearing used to subsize this transition over a period of 10 to 20 years.

Replacing Stamp Duty with Land Tax will lead to major productivity gains, better utilisation of housing stock and more stable revenue for governments. It’s a win-win for everyone. This reform aligns with the recommendations by Dr Ken Henry and are also in line with OECD best practice principles.

These reforms need to be implemented over 10 to 20 years, via a stepped change through various market cycles. If designed correctly, the figures set out above have attempted to show that there is the possibility for these changes to minimise any distortions to the market and could even be revenue neutral.

Final Thoughts

This article has highlighted that the current tax settings as they apply to the housing market are not working as efficiently as they could be. We are at a moment in time where we need to have a fully informed debate about how these settings could be changed so that the system is fit for purpose and produces better outcomes for all residents of Australia.

Given the change in voter base, our views are that significant changes are inevitable given the dissatisfaction with the current Federal, State and Local policies in addressing both the housing crisis as well as the cost of living crisis in Australia.

Now is the time to act and Charter Keck Cramer is here to support these debates with thought leadership.

This article has been republished with permission from Charter Keck Cramer. Read original here.

Trust, but verify - What homebuyers now demand from housing AI

By John Rogers, Chief Data and Analytics Officer Cotality

Purchasing property is often the largest financial decision people ever make. And that significance creates a deep hunger for information every step of the way. Artificial intelligence— generative, agentic, and machine learning — at scale now feeds that hunger.

Tens of millions of buyers welcomed it in, fast and without much resistance. What they want from it next is the harder, more interesting question.

Fifty-five percent of homebuyers now use generative AI tools at least once a month. Three-quarters already assume AI is running somewhere inside the homebuying process — in property search, in valuations, in the rate quotes that appear on their screens. By those measures, the industry's AI moment has arrived in a big way.

But peel back the curtain to look beyond the surface-level acceptance, the numbers tell a different story.

Introduction

Among prospective buyers in the United States, trust in AI tools to help find a home dropped nearly in half, from 30% in 2025 to 16% today. Preference for working with human professionals has risen across every major task: finding a mortgage, securing homeowners insurance, and navigating legal paperwork. Sixty-eight percent of buyers say they would manually verify every detail, or a significant amount, of anything an AI tool provides them in a housing context.

Buyers who once approached AI as a novelty now assess it the way they assess any other infrastructure: by whether its answers are accurate, transparent, and recoverable when it goes wrong. Familiarity, it turns out, creates standards rather than complacency.

The pattern holds across the four geographies in which we conducted our survey, though with meaningful variation. U.S. and Canadian buyers are more open to AI involvement in automated valuations and rate decisions than their United Kingdom and Australian counterparts. Millennials lead AI tool adoption and also lead willingness to pay for human verification of AI outputs. Gen Z is the most likely generation to gain confidence from AI's involvement in a transaction, and also among the most likely to invest in verifying what it produces. This finding comes on the heels of a Cotality survey last year that showed Gen Z losing confidence as they progressed into the buying journey. It appears AI can help ease that anxiety.

Although Baby Boomers report the most distrust of AI details, younger generations — especially Millennials — are more likely to invest in AI verification from expert professionals.  

Generational reliance on human verification of AI outputs

Technology has moved faster than trust in it has followed. AI adoption happened in the open; the trust deficit accumulated in missed moments. This Cotality report measures those gaps and opportunities precisely, by sector, by geography, and by generation.

The starting point is clear: AI is now being held to a higher standard, and closing the trust gap is now the defining market imperative entering 2026.

A 21-year-old recent buyer in the U.S. captured the sentiment plainly: she didn't want to take a risk when she had “in-person real individuals that have years of experience” to lean on. She was not so much dismissing AI as pricing the cost of being wrong.

What this report covers

Cotality's Q1 2026 housing trends research surveyed homebuyers in the U.S., Canada, the U.K., and Australia between January 29 and February 9, 2026. The sample split between recent buyers (purchased within five years) and prospective buyers (planning to purchase within two to five years), with generational coverage across Gen Z, Millennials, Gen X, and Baby Boomers.

The report is organized around six findings that have direct operational implications for lenders, brokers, insurers, regulators, and the wider property industry.

How is AI changing the housing market?

Overarching findings from a survey of recent and prospective homebuyers across the U.S., Canada, U.K., and Australia in Q1 2026.

• Lenders and brokers: Trust in AI tools is softening in a key segment — many ask about bias in automated valuation models. Your response affects customer retention measurably, and in a consistent direction.

• Insurers: You are already perceived as the heaviest users of invisible, background AI. That perception carries the largest share of the trust burden.

• Real estate professionals: Buyers are arriving better informed but less confident. The value of professional guidance when it comes to AI in real estate has shifted in terms of what it needs to deliver.

• Legal and compliance: Consumer expectation is pushing toward norms on disclosure and contestability. The data supports that direction with unusual clarity.

01

Disclosure starts here

How AI is reshaping the housing market

Industry implications

• Lenders and brokers: Standardize disclosure language across sites, broker portals, and customer communications. Inconsistency between channels reads as concealment.

• Insurers: Place disclosure at the precise moments when AI affects eligibility, coverage, or price. General statements about using data are not sufficient — buyers want to know when and how AI shaped the specific number in front of them.

• Legal and compliance: Draft disclosure language that works simultaneously as a consumer communication and as a defensible audit document — the two functions reinforce each other.

• Regulators: The data supports baseline rules and common definitions across the industry. One-off labeling approaches will produce a patchwork that satisfies no one, and older buyers are pushing for legal requirements — that pressure is measurable and growing.

• Real estate professionals: Align claims and disclosures in sales materials with buyer expectations that AI influence is flagged — particularly where AI-generated valuations or neighborhood assessments appear in listing materials.

Like most disruptive innovations, AI has shifted quickly from novelty to expectation. Three in four buyers say they think it is playing a role in the homebuying process, both through visible interactive tools and the invisible backend algorithms working underneath. And it is easy to see why. Property search sites now serve up precise recommendations in seconds, and 86% of buyers assume that is AI at work. Prequalification mortgage rates appear on the fly. Insurance quotes arrive at a speed once impossible through human underwriting alone.

It is little surprise, then, that more than 80% of buyers attribute this pace to artificial intelligence. Even government housing bodies, hardly known for cutting-edge automation, are assumed to use AI by 74% of buyers. The assumption that AI is already powering much of today’s real estate industry is broad, and shared across generations.

But the mental model buyers carry on AI involvement is more nuanced than a simple yes or no. They distinguish between two roles: foreground AI — tools they interact with directly for search, comparison, and valuation — and background AI that makes decisions about them, including insurance underwriting and lender risk scoring. Property websites score highest for visible, foreground use. Insurers take the top position for invisible, data-driven use, where algorithms act for consumers without their direct engagement.

That distinction carries real commercial weight. Being perceived as an AI-driven process but without clear insight into how it works places insurers at the sharpest end of disclosure scrutiny — and likely first in line should regulatory norms around transparency tighten.

A 32-year-old Millennial future buyer in the UK clearly described the overarching preference of survey respondents for visible AI involvement: she wanted to actively engage in research and decision-making, with the ability to explore different options, ask questions, and receive personalized insights — specifically because having that “sense of control” mattered when the stakes were this high.

"I prefer foreground AI for the homebuying process because it allows me to actively engage in research and decision-making," the 32-year-old Millennial future buyer in the UK said. "I'd feel more confident knowing I'm fully informed and have the ability to explore different options, ask questions, and get personalized insights. It's important for me to have that sense of control, especially for something as big as buying a home."

It is no longer enough to simply say AI is powering insights. Buyers assume AI is present, and 68% say clear notification whenever AI generates a listing, price, or mortgage recommendation is either very important or even a legal requirement. That figure rises sharply with age: 61% of Baby Boomers say it should be legally mandated. Among Gen Z — the cohort most comfortable with AI in every other context — that figure is 25%. But even younger generations are emphatic that notification matters; they simply express it through expectation rather than legislation.

Buyers know AI is in the system. They want to be told precisely when and how it is shaping the specific decision in front of them. Assumed presence and demanded transparency sit comfortably in the same mind — they are not contradictory impulses, they are sequential ones.

Some in the industry have been treating disclosure as a branding question — whether to mention AI as a feature. This misses the point. Buyers have moved on to a governance question: whether they can see, understand, and contest what AI is doing to their options. A 33-year-old Millennial future buyer in the UK put it succinctly: “I trust AI to an extent but would like to make the decisions myself. I think AI is still at the stage where its output needs to be checked manually.”

‍The geographic picture adds texture. U.S. and Canadian buyers show higher overall acceptance of AI involvement than their UK and Australian counterparts. UK buyers score higher on demanding human involvement across legal assistance and insurance tasks — a market where professional trust hierarchies remain strong. For companies operating across multiple markets, disclosure strategy needs to flex by geography, as well as by product.

‍This article has been republished with permission from Cotality. Read original article.