Several important factors have lined up, delivering optimism that Australians will be building in strong numbers next year.
Australia is in the midst of a five-year goal to build 1.2 million new homes, with the country fixated on how progress is tracking.
Unfortunately, over a year into the task, building approval figures have shown no clear trajectory. At no point has the monthly figure for national approvals met the threshold for construction to be considered “on track”.
Australia needs to be approving 20,000 homes each month to hit the target. In reality, approvals should be even higher to account for developments that don’t move forward.
ABS figures showed that just 14,744 dwellings were given the green light in August 2025.
Home building approvals must pick up for Australia to meet its housing commitments. Image: Getty
But building advocates have long indicated that progress was expected to be slow to start, ramping up in capacity over the five-year period.
For that reason, many eyes will be on the building data of 2026, which will see the building target firmly in year two.
According to a number of industry experts in the house and land sector, there’s expectation that Australians will be choosing to build detached houses in strong – albeit not record-breaking – numbers in the year ahead. Here’s why.
Lower interest rates
In 2025, the Reserve Bank of Australia has made three cash rate cuts, and each cut added a little extra borrowing capacity into prospective home-builders’ wallets.
As Luke Kelly director at RPM explained:
“The three 25 basis point interest rate cuts in February, May, and August helped households regain some of the borrowing capacity lost through 2022 and 2023. This has narrowed the affordability gap between what buyers can pay and the cost of their desired house and land package, allowing more purchasers to enter the new home market.”
Adam Duster, CEO at Oliver Hume Home Solutions noted, “Every 0.25% cut adds roughly $15,000 in borrowing capacity on a $500,000 loan”.
But he also commented that extra $45,000 in buyers’ pockets is not likely to have been the make-or-break price difference for a lot of buyers.
And given that construction costs and land prices have risen sharply in the last few years, the impact of the rate cuts has been modest, according to Mr Duster.
“Our research shows there’s still around a $170,000 gap between what the average Melbourne buyer can borrow and the cost to build a new home,” he explained.
Ultimately, the three cuts of 0.25% each – bringing Australia’s official cash rate to 3.60% – haven't had a huge impact on borrowers’ budgets. What these cuts did achieve, however, is foster a belief among buyers that interest rates are on a downward trajectory.
Confidence is king
Interest rate cuts have still had an impact on the market due to their impact on buyer sentiment.
"The cuts have provided much-needed certainty – buyers who were sitting on the sidelines are starting to re-engage,” said Mr Duster.
Ben Stewart, project marketing director at Core Projects, made a similar observation.
“Whilst the actual lending capacity impact of each interest rate cut is only minor, the comfort of rates heading in a downward direction has helped to rebuild confidence of buyers bringing them back to the market and increasing willingness to make a purchase commitment,” he explained.
With this uplift in sentiment, Australians who have been eyeing a new home build are expected to feel more ready to sign on the dotted line in the year ahead. Coupled with this positivity, new factors are also expected to add more buyers to the pool.
Interest rate cuts have given buyers confidence in the market, according to building advocates. Picture: Getty
Demand outlook promising
According to Mr Duster, “The real momentum is coming from demand-side support like the federal government’s Home Guarantee Scheme and the upcoming Help to Buy program, which are bridging that gap for qualified buyers”.
He believes that the fundamentals in three key cities will remain particularly strong.
“Perth, Adelaide, and Brisbane have been the standout performers this year – they remain fundamentally undersupplied markets.”
Mr Kelly noted that the nation’s strong migration figures would also support detached-home building.
“Sales activity is expected to continue trending higher, supported by strong population growth and improved affordability, which should also release some of the pent-up demand in the new home market,” he said.
A rendering of new estate William Lakes in Gawler Belt, SA. Adelaide has been one of the standout performers for house and land packages in 2025. Image: realestate.com.au
Looking ahead
While a dramatic increase in detached home-building approvals over 2026 would be welcome in light of the nation’s home-building target, it’s not likely. Nonetheless, according to these project marketers, the signs for the current trajectory of house building should be taken as a positive.
“The overall picture is one of gradual recovery, with a more stable base for growth heading into 2026,” said Mr Duster.
“We expect steady improvement rather than a sudden surge – especially in Melbourne, where population growth is again outpacing housing supply. For Adelaide, Brisbane, and Perth – supply remains tight, so sales should continue much as they have this year: strong and consistent,” he added.
Mr Stewart commented that the government’s new 5% deposit scheme, which came into effect on 1 October, 2025, would accelerate sales in 2026, with first-home buyers now “starting to explore their options”.
Further interest rate cuts, he said, would keep keep first-home buyer activity high.
Mr Kelly underscored the need for further rate cuts to establish growth momentum.
“The strength of sales growth will depend on upcoming interest rate decisions. If rates hold steady, sales growth is likely to be more modest. More robust growth would follow if the RBA delivers further cuts in late 2025 and early 2026, contingent on inflation outcomes in the September and December quarters,” he said.
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