Australia will likely fall almost 200,000 homes short of the Federal Government’s ambitious plan to build 1.2 million homes over five years, according to the latest HIA forecast.

According to HIA’s economic and industry outlook report, building on little more than one million new homes is due to start over the next five years. 

HIA Senior Economist Tom Devitt said it was possible to build the 1.2 million new homes but it would require significant policy reforms.

“These reforms need to include lowering taxes on home building, easing pressures on construction costs, and decreasing land costs,” Mr Devitt said. 

The research showed 96,250 detached homes were expected to be built in 2023/24, which is down 12.6 per cent on the previous year and down by almost a third on the 2020/21 peak. 

This will mark the trough of the cycle and the weakest financial year since 2012/13, over a decade earlier. 

Commencements are expected to remain weak at 97,800 in 2024/25, just a 1.6 per cent improvement, before recovering and exceeding 110,000 by 2026/27.

It’s a slightly different story for multi-unit commencements with building on 72,010 expected to start in 2023/24, up by 14.1 per cent on the 63,100 trough and 11-year low in 2022/23. 

The recovery in multi-unit commencements is expected to continue, up by 23.1 per cent to 88,610 in 2024/25 and reaching almost 100,000 by 2026/27, before moderating back to 96,230 by 2027/28.

“As it stands, both the detached housing and multi-units markets are set to be recovering in 2024/25 from recent decade lows,” Mr Devitt said.

Mr Devitt said that recovery wasn’t reliant on a cut to the cash rate, which is looking increasingly uncertain for this year, but a more stable interest rate outlook.

“Pent up demand for housing will allow market confidence to grow and buyers to return to the market,” he said.

“This recovery will, nonetheless, be insufficient to meet government housing targets as long as home building continues to be constrained by punitive taxes and regulations.

“Punitive tax surcharges on foreign investors are squeezing out precisely the investment needed to help meet government housing targets.”

Mr Devitt said recent changes to building codes were also likely to add tens of thousands of dollars to the cost of building a new home. 

He said more needed to be done to increase the capacity of the building industry.

“Access to skilled labour from overseas will remain crucial, as will the need to train and upskill our existing workforce,” Mr Devitt said.

“More support for apprenticeships, including maintaining current apprenticeship subsidies, will go a long way in this direction.

“Reforms in these areas would represent a material upside risk to this housing outlook and could see Australia exceed the government’s target and potentially build sufficient homes to meet demand.”