Building industry groups beleive Albanese government changes to negative gearing and capital gains tax could make already falling home commencements worse.
Australia’s efforts to build its way out of a housing crisis were going backwards before a federal budget decision to change key tax settings, it can be revealed.
The nation commenced 6000 fewer new homes in the March quarter this year than it did in the three months to the end of 2025, with warnings bigger drops could still be ahead after the May budget altered investor benefits around negative gearing and capital gains tax.
Australian Bureau of Statistics data released today shows the nation’s builders started 48,012 new homes in the first three months of 2026.
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It was a marginal uptick of about 100 homes from the same period a year prior, though about 8000 higher than March in 2024, before the National Housing Accord’s five-year timeline to build 1.2 million new homes around the country commenced.
The March figures indicate that the nation has commenced work on 197,341 new homes in the past 12 months, more than 40,000 short of the original 240,000 homes a year target under the Accord.
After failing to hit the figure for more than a year, the nation now needs to build more than 260,000 homes a year to catch up for the remainder of the timeline.
But with the federal government having already admitted their May budget’s changes to negative gearing and capital gains tax will lead to fewer new homes being built, and the war in Iran as well as three interest rate hikes from February to May, all yet to influence the data — experts are anticipating the tail end of this year could be in for even lower completions.
HIA chief economist Tim Reardon believes the nation is getting further away from its 1.2 million new homes in five years goal. Picture: NewsWire / Martin Ollman.
Housing Industry Association chief economist Tim Reardon said the biggest takeaway from the data was what it meant for how the nation was tracking towards its 1.2 million homes in five years goal.
“And we seem to be getting further away from it,” Mr Reardon said.
“We are now almost 30 per cent below target.”
HIA is now estimating the nation needs to build 250,000 new homes a year in perpetuity to meet the nation’s increasing population and decreasing household size, and that reducing the taxes that go into building homes was a key support the government needed to consider.
Master Builders Australia Chief Economist Shane Garrett said for builders working on the homes, the March quarter had been tough — with many facing unexpected cost hikes that were not factored into their budgets from the iran war and other cost surges.
Master Builders chief executive Denita Wawn said the tax changes were already hitting new housing planning. Picture: NewsWire / Martin Ollman.
Master Builders Australia CEO Denita Wawn said members were already warning the federal budget’s changes to tax settings for property investors had hit confidence and were “slowing investment decisions”.
“This uncertainty means some builders will think twice before proceeding with new projects,” Ms Wawn said.
“In some cases, projects may be delayed, scaled back or not proceed at all.
“Australia cannot afford policies that make it harder to attract investment into construction when we need to deliver more homes, transport infrastructure, schools, hospitals as well as energy and Olympic projects over the next decade.”
Real Estate Institute of Australia president Jacob Caine said the group had been “concerned about the housing agreement almost from day one” and the latest figures confirmed it was not going well.
Housing construction in Australia is now not even keeping up with the nation’s population growth, let alone getting ahead of the problem.
Forecasts completed for the National Housing Supply and Affordability Council earlier this year indicate that only 938,000 homes will be built out of the proposed 1.2 million by July 1, 2029.
Mr Caine said the nation was now not only failing to build enough homes to address its historic shortage — but was not even keeping pace with increasing underlying demand from population growth.
“1.2 million homes is supposed to address the existing shortfall and now we are not even meeting the growth of household numbers in the country,” Mr Caine said.
“The point the REIA has made to the government at multiple senate hearings and multiple inquiry submissions is that only policies that deliver new homes should be considered in the current context.
“Australia is in a structural housing deficit and policies that lead to a lower number of homes in the system makes housing less affordable for first-home buyers and for renters. And that will continue into the future.”
There is a growing question over whether the benefits of the Albanese government’s changes to negative gearing and capital gains tax outweigh the negatives. Picture: Martin Ollman.
Modelling by the REIA, Master Builders, HIA and Property Council released in the aftermath of the budget showqed that even with $2bn in infrastructure spending, the changes to CGT and negative gearing were expected to lead to 8742 fewer homes being built around the country.
Mr Caine said with government projections indicating those changes would help 75,000 renters buy their first home, it effectively worked out to assisting about 1 per cent of the nation’s rental population.
However, he warned the remaining 6.925m renters would be facing a rental system that would get more expensive and difficult to exit as shortages of available homes grew worse.
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