Mortgage Choice data shows construction loans growing faster than any other loan type
Demand for construction loans is climbing sharply, according to new figures from Mortgage Choice, with the broker network recording a 38% increase in construction loan volumes over the 12 months to May — the highest growth rate of any loan type it handles.
The rise precedes further anticipated demand following federal Budget announcements that restrict negative gearing on existing homes purchased after 12 May 2026. Investors seeking to retain the tax concession will now need to direct funds into new builds, a shift that brokers and industry bodies expect to accelerate activity in the new construction market.
Australian Bureau of Statistics data shows new home starts rose 8% in the December 2025 quarter — the strongest result since September 2021. Higher-density commencements increased by 19.9%, while detached housing starts edged down 0.7%.
Construction loans differ from standard home loans in structure. Rather than receiving funds in a single lump sum, borrowers draw down against the loan balance at key stages of the build, known as progress payments. Lenders typically apply interest-only repayments until construction is complete, meaning borrowers repay no principal until the full balance is drawn down.
Despite rising loan volumes, brokers caution that competition in the new homes market intensifies well before financing discussions begin, with residential land availability a persistent constraint.
"We already have people lining up to buy new land releases, which means the changes announced in the Budget to stimulate housing construction will be stymied," said Larissa Barton (pictured right), broker at Mortgage Choice.
Barton had expected the budget to address stamp duty as well. "The hurdles involved in unlocking new land releases takes forever to have more residential land released for purchase," Barton said.
Industry figures highlight that the national housing pipeline remains well short of government targets, potentially extending wait times for prospective construction borrowers.
"Australia has amassed a 77,500-home shortfall since the start of the National Housing Accord, with these latest figures meaning that an unprecedented 262,140 new homes per year need to be built over the remained of the Accord's term to 2029," said Shane Garrett, chief economist at Master Builders Australia.
The trade body is urging government to implement a broader suite of policy measures to support the building and construction sector, which it says employs approximately 1.3 million Australians.
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