Tax changes and SMSF borrowing ban slow a construction recovery already under way, says HIA
Australia will fall 186,000 homes short of its 1.2 million Housing Accord target, the Housing Industry Association (HIA) has warned, as recent federal Budget measures cut into a pipeline of new homes that had already been growing.
The warning comes in HIA's latest Economic and Industry Outlook report, which covers new home building and renovation forecasts nationally and across all eight states and territories.
The association still expects commencements to rise in the next couple of years, but at a slower pace than would have occurred without the policy changes.
"Despite recent changes to housing taxation and investment settings, HIA expects the number of homes commencing construction to continue to rise in both 2027 and 2028, albeit, slower than would have occurred," said Tim Reardon (pictured right), chief economist at HIA.
"As outlined in the federal Budget, increased taxes on established housing will reduce the supply of new homes, while the subsequent prohibition on SMSFs borrowing to invest in residential property will remove another source of new home finance. These policies have interrupted an expansion in home building that was already underway."
Reardon argued the projected rise in commencements should not be read as evidence that the housing shortage is being resolved. Population growth and household formation continue to outpace new supply, and the HIA expects these structural pressures to drive a return to positive home price growth from early 2027.
The report also challenges the assumption that tax concessions such as negative gearing on new builds can shield the new home sector from broader price falls affecting established housing. Reardon said the two markets are not separate, and that what investors are prepared to pay for an established home directly affects what they will pay for a comparable new one.
"This is why permitting negative gearing for newly constructed homes does not quarantine new housing from the impact of higher taxation on established housing," the economist said. "The tax rules may distinguish between new and established homes. The housing market does not."
The HIA warned of a further paradox: when established home prices fall but the underlying costs of land, labour, materials, infrastructure, finance and regulation do not, fewer new projects become financially viable. Lower prices may improve near-term affordability for some buyers while reducing the supply needed to sustain it over the longer term.
The report flags a downside risk should policy uncertainty persist beyond current expectations, which the HIA says would weigh further on new home building activity. "Confidence is hard won and easily lost," Reardon concluded.
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