The Homes That Were Never Built

Ask ten people what’s causing the housing crisis and you’ll get ten different villains. Migration’s too high. Investors are hoarding stock. Councils sit on approvals. Interest rates killed the builders. Everyone’s got a culprit, and everyone’s partly right, which is exactly why none of it adds up to an answer. There’s one number that explains more of this than all of those arguments combined, and it’s not the one getting the airtime. 

Australia completed about 173,000 dwellings last year, well down from the roughly 219,000 completed in 2016-17, at the peak of the last apartment construction boom. That drop is significant on its own. But it’s not the only number that matters, and looking at it by itself misses the real story. To understand where the imbalance actually sits, we pulled together approvals and migration data alongside the completions figures, and lined them up against each other.

Split completions by type and detached houses have barely moved. Around 110,000 houses get finished a year, and that figure has sat in roughly the same place for a decade. Nobody stopped building houses. What collapsed was apartments and townhouses, down from about 106,000 completions a year at the 2017 peak to 62,000 in 2025. A drop of 41 per cent. Every dollar of the national shortfall you keep hearing about sits inside one category of home, and it isn’t the one most investors default to.

Meanwhile demand went the other way, and it moved fast. Borders closed in 2020 and net overseas migration briefly went to nothing, the only stretch in a decade where supply ran ahead of demand. Then borders reopened and migration peaked at 556,000 in the year to September 2023, before easing back to 311,000. The National Housing Supply and Affordability Council, the federal body that tracks this, put underlying demand, its estimate of how many dwellings population growth and shrinking household sizes actually require, at 223,000 for 2024. Completions that year were 177,000. A 46,000 gap in a single year. Against the National Housing Accord, the government’s target of 1.2 million new homes by mid-2029, the official scorecard puts the shortfall at 55,000 dwellings in just the first eighteen months.

Here’s the number that actually holds up under scrutiny. It’s tempting to multiply that shortfall by household size and call it a population displaced, but that arithmetic is closer to circular than it looks, since underlying demand is itself derived from population growth in the first place. The harder number to argue with is this one: adults per household in Australia rose from 2.08 to 2.10 in the twelve months to July 2025. That’s observed, not modelled. Spread across ten million occupied dwellings, it accounts for roughly 200,000 adults who didn’t form the household they would have otherwise. Adult children staying home longer. Share houses that don’t break up. Renters who can’t afford to move out on their own. The demand hasn’t disappeared. It’s been absorbed into stock that already exists, and it’s sitting there waiting for somewhere to go.

So why hasn’t the pipeline caught up? Cost is only part of it. Developer and builder fees have climbed along with everything else, apartment construction in Queensland now runs at around $5,000 a square metre, up 21.2 per cent in a year, the highest of any state, and residential land hit a record national median of $391,420 last quarter. But a project doesn’t just need to stack up on cost. It needs an approval, and it needs enough presales locked in before a bank will fund it, and both of those are exposed to interest rates in a way the raw build cost isn’t. Presale volumes soften when buyers are facing the same rate environment as everyone else, and a strong cost case doesn’t get a tower financed on its own if the presales aren’t there. That’s the part that doesn’t fix itself just because costs eventually settle.

None of that is bad news if you’re the one holding stock, or buying it, established or new. Every project that doesn’t get up pushes demand onto whatever does exist, or whatever does make it to completion. The scarcity that keeps new supply hard to bring to market is the same scarcity supporting the value of what’s already built, and what’s about to be.

There is a pipeline, and it’s not imaginary. Approvals hit 196,000 nationally in the year to February 2026, with Queensland up 16.8 per cent. Historically about 98 per cent of approvals get finished. But an approval takes eighteen months to two years to become a house, longer again for an apartment, so nothing meaningfully changes this arithmetic before 2028.

You’ll have seen this month’s headlines too. National prices fell 0.7 per cent in July, the sharpest monthly drop since December 2022, with more than three-quarters of capital city suburbs recording a decline over the past three months. We covered why that framing gets read wrong in “Cool Your Jets: What ‘The Market Is Falling’ Actually Measures,” and the short version applies here as well. Almost all of that fall is sitting at the top of the market. Upper-quartile values are down more than 3 per cent over three months, while the lower-priced tier has actually gone up. Analysts are pointing at three consecutive rate rises and tighter borrowing capacity, not at demand drying up.

None of the numbers above moved while that headline was written. Migration is still running well above the levels this country built for. Completions are still concentrated in the one category that barely shifted in a decade. Households are still compressing rather than forming. Cotality’s own research director has said the quiet part out loud: construction continues to undershoot underlying demand, and that gap could widen through the year. A monthly dip driven by borrowing capacity at the expensive end of the market doesn’t touch any of that. If anything, it’s happening furthest from where the real shortage sits.

Queensland is where this is already showing up in prices, falls and all. Dwelling values rose 17 per cent in the year to March, and unlike most markets, units grew at close to the same pace as houses. That’s unusual. Cotality’s own research director has pointed to exactly this dynamic, low supply meeting population growth, particularly interstate migration into the south east, as the reason values keep holding even as momentum cools elsewhere in the country.

For investors, the read is straightforward. Every year this shortfall persists, more demand piles into dwellings that already exist. Well located existing stock, and small scale infill capable of carrying two dwellings where there’s currently one, sits exactly where that pressure is landing, whichever way the monthly headline reads.

GET THE RIGHT ADVICE

Knowing there’s a shortfall is the easy part. Knowing which segment it’s actually sitting in, and which property gives you exposure to it, is what an Investor Property coach is for.

SPEAK TO AN INVESTOR PROPERTY COACH >> https://investorproperty.com.au/contact/

THE CLARITY REPORT IS COMING

If this piece left you more frustrated than reassured, that’s the point. It’s easy enough to see the individual pieces of Australia’s housing failure one at a time; migration, approvals, construction costs, financing. What’s harder to see is how they fit together, and who let it happen.

That’s the question The Clarity Report was built to answer. A decade watching this market up close, and two years spent building the case properly, examining the approvals, the capital, the policy decisions and the construction data behind Australia’s housing crisis. It’s coming soon. Register here to be among the first to access it.