Hand brake placed on Victoria’s new home construction
Top housing body says new 'tax settings and restrictions have interrupted an expansion in home building that was expected in 2026'.
THE fallout from recent federal changes to housing taxation and investment settings will see Victoria’s home building recovery delayed at least another year, according to the Housing Industry Association.
HIA recently released its Economic and Industry Outlook report. It includes updated forecasts for new home building and renovations activity nationally and for each of the eight jurisdictions.
Keith Ryan, Victorian executive director of HIA, said Victoria commenced construction on just 56,630 new homes in 2025.
“And this was previously expected to get close to 60,000 in 2026. Now, this threshold is not expected to be crossed until 2028,” Ryan said.
“The Australian government has increased taxes on established housing, explicitly noting in its Budget papers that this will result in 35,000 fewer homes being building across the country over the coming decade.
“The subsequent prohibition on SMSFs (self managed super funds) borrowing to invest in residential property will remove another source of new home finance, having a directionally similar impact on home building.
“These tax settings and restrictions have interrupted an expansion in home building that was expected for Victoria in 2026.”
Ryan said the Victorian government has made things worse with its excessive land taxes including the Covid debt levy, high stamp duty rates, absentee owner surcharges, foreign purchaser additional duty and the windfall gains tax.
“The Victorian government has set itself a target of 80,000 new homes built per year over the coming decade, a target that is not expected to be met in any single year,” Ryan added.
“Victoria’s population continues to grow and households continue to form at a rate faster than supply of new homes. Victoria already has a significant shortage of homes and this will only get worse.
“HIA expects these structural forces to increasingly dominate the housing cycle and result in a return to positive home price growth from early 2027.
“The eventual increase in commencements should not, however, be interpreted as evidence that Victoria’s housing shortage is being resolved.
“Rather, it is the shortage itself that will eventually generate the market conditions required to support more construction.”
Ryan said there is a fundamental difference between reducing the price of an established home and reducing the cost of delivering a new one.
“The established and new home markets are not separate markets,” he said.
“The tax rules may distinguish between new and established homes. The housing market does not.
“When established home prices fall but the cost of land, labour, materials, infrastructure, finance and regulation does not, fewer new housing projects are financially viable.
“Once the market recognises the lack of new supply, prices head back up and affordability deteriorates all over again.
“If governments want to boost the supply of housing and sustainably improve affordability, they need to reduce the cost of construction, not damage market confidence in a way that just temporarily suppresses prices in the established market.”
