Australia Reports Rise in Housing Construction Amid Policy Debate

Australia Reports Rise in Housing Construction Amid Policy Debate

Australia: Australian Bureau of Statistics released building activity data for the December quarter of 2025, reporting that the number of homes commencing construction during the year increased by 16.4 per cent compared to 2024. This included a 5.6 per cent rise in detached house commencements and a 35.3 per cent increase in multi-unit developments. The data indicates a recovery in housing construction, supported by lower interest rates and employment levels during the year.

“Home building activity picked up in 2025 on the back of declining interest rates and low unemployment across the country. With interest rates on the way back up, the task of increasing supply will depend on governments reducing the cost of delivering new homes to market in other ways. This includes reducing taxes on housing, not increasing them. Housing is one of the most heavily taxed items in our economy along with the ‘sin taxes’ of alcohol and tobacco. Recent discussion around increasing capital gains tax on investors and winding back negative gearing is pointing the conversation in precisely the wrong direction. The logic that taxing investors in the established market will force investors to build new homes is flawed. New housing becomes existing housing. Investors in new housing supply know that they will effectively incur such a tax when they sell their property, deterring them from investing in that new supply in the first place, even though the tax was directed at the established market. This will worsen affordability, reinforcing the inequity in housing whereby the wealthiest Australians with pre-existing assets and borrowing power are increasingly the only ones able to access the market. If governments want to address this inequity in the housing market, as they should, then they need to increase supply. If the government wants to raise more revenue, then they need to build more homes. Around USD 200,000 is raised in direct tax imposts alone from each new house – even more in some markets. Raising more revenue through capital gains tax might have a short term benefit to the federal budget but risks the loss of other tax revenues such as stamp duty and GST to the states as well as exacerbating the inequity in the housing market. In the last year, investors were responsible for over 40 per cent of new home building across Australia. Attempts to tax them out of the housing market will reduce the supply of new homes without affecting housing demand,” concluded Mr Devitt.

Source: Housing Industry Association Limited