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While demand for housing remains elevated in NSW, the outlook for home building in the state is much weaker compared to other jurisdictions, according to the Housing Industry Association (HIA).
The latest HIA Economic and Industry Outlook report showed that NSW is set to begin construction of 252,060 dwellings over the next five years, which falls more than 120,000 homes short of the state’s national housing target.
HIA executive director for NSW, Brad Armitage, said the high cost of residential land, particularly in Sydney, impacts the housing supply needed for the state’s growing population.
“Low unemployment, ongoing population growth, low vacancy rates and a cut to the cash rate should help entice more buyers into the new home market, but supply-side barriers are preventing them from getting into a home,” Armitage said.
Data showed 5,190 detached houses commenced construction in NSW over the September quarter of 2024, registering 1.7 per cent lower compared to the previous quarter.
The report also analysed upcoming detached housing starts data, which estimated they fell to 5,140 in the December quarter of 2024, and will increase to 5,310 in the March 2025 quarter, and 5,540 in the June quarter.
Armitage said detached housing starts fell to decade-lows in 2023–24 at just 21,200 and are expected to fall even further in the 2024–25 financial year to 21,180, but would likely see a modest pick up from 2025–26 onwards.
Additionally, the report showed that 6,010 multi-unit dwellings commenced construction in NSW during the September quarter of 2024, which was 21.6 per cent higher than the previous quarter.
Estimated data showed that multi-unit starts fell to 5,500 in the December quarter of 2024 before picking up modestly to 5,660 in the March 2025 quarter, and 5,730 in the June quarter.
Despite the estimated data of multi-unit starts in 2024–25 being 19 per cent higher than the previous year’s 12-year low, Armitage said multi-unit starts are forecast to remain at decade-low levels until 2026.
“The multi-unit sector will be constrained unless policy changes are made to attract, not impede, the needed investment to get apartment construction online,” he said.
Armitage said despite some positive governmental housing initiatives over 2024, more actionable ideas are needed to implement the policies effectively.
According to the HIA director, the NSW government’s “missing middle” policy, which encourages construction of low- to mid-rise housing, has suffered from a prolonged rollout period, as it was first announced in 2023 and will commence at the end of February 2025.
“Delays have arisen from local council elections and councils are given far too much scope to prevent building occupancies on underutilised blocks of land.
“There is simply too much uncertainty over the policy and it is stalling the delivery of these new homes,” Armitage said.
According to the peak body, the 15-month delay since the announcement has impacted building construction, which is “still rattling around the bottom of the barrel at decade low levels”.
Armitage also highlighted that Sydney’s lack of greenfield land available for residential development is increasing.
“Specific policy announcements backed by rock solid implementation plans to rezone and develop greenfield land for residential development is needed urgently,” Armitage concluded.
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