Conflict, Construction Costs Squeeze Housing Accord Gains

Australia’s housing system was on the verge of its best news in years, but the Middle East conflict has changed everything. Now, global supply chain disruption has again emerged as a real threat to the delivery of tens of thousands of homes. The National Housing Supply and Affordability Council’s (NHSAC) State of the Housing System 2026 report, released at the Property Council’s National Housing Solutions Summit in Melbourne on April 30, estimates about 980,000 new homes were expected by June 30, 2029, before the conflict. That was an increase of 42,000 homes on the previous year’s forecast. But NHSAC chair Susan Lloyd-Hurwitz said war in the Middle East had created significant uncertainty. “The impacts on shipping, transport and material costs have placed pressure on construction, and this creates significant challenges,” Lloyd-Hurwitz said. Federal housing minister Clare O’Neil said the trajectory had been encouraging before the conflict’s escalation. “Right before the conflict, [NHSAC] was forecasting a 40,000-home uplift on how we were tracking against the 1.2 million homes target,” O’Neil said. ▲ Housing minister Clare O’Neil: Single most important thing we can do ... is radical, big, visionary state planning reform. Two scenarios modelled in the report showed how much conditions could shift. Under a short-term scenario, with construction cost escalation peaking at 6 per cent mid-year, around 10,000 fewer homes would be built by 2029. A prolonged scenario, assuming a 10 per cent peak cost increase, showed 33,000 fewer completions by the end of the Accord period. Stockland chief executive Tarun Gupta said that before the conflict, construction cost inflation was tracking close to CPI in most states before March—around 5 per cent in Western Australia, negative in Victoria and near CPI in New South Wales. “Now it’s all over the place,” Gupta said. “The critical difference from three or four years ago, when supply chains broke and prices rose, is that this time we don’t have that buffer. “If construction costs rise, house prices can’t necessarily follow. We don’t have the capacity to pass costs through, which means activity will slow.” Mirvac chief executive Campbell Hannan echoed Gupta’s sentiment, and said that more than a third of the cost of a house was government charges, developer contributions or taxes. ANZ general manager institutional property and health Jo Scotney said supply chains were under the most pressure since the peak of the pandemic, with tariff increases compounding flow-through effects on costs. Property Council of Australia chief executive Mike Zorbas said the report highlighted the fragility of project feasibilities nationwide. National confidence across the sector has recorded its biggest quarter-on-quarter drop since 2022, and the steepest decline in housing capital investment sentiment since the pandemic. “When confidence weakens, investment decisions freeze. When investment pauses, housing delivery becomes a real grind,” he said. Affordability deteriorated sharply through 2025, with median rental costs consuming a record high 33.1 per cent of median household income. Younger Australians now need 11.2 years to save a 20 per cent deposit, up from 9.0 years in 2015. Sector insolvencies reached 3,325 in the 12 months to March 2026, predominantly in New South Wales, Victoria, and Queensland. Planning Institute of Australia chief executive Matt Collins said planning systems had improved at generating approvals, but financial and infrastructure barriers prevented many from proceeding to construction. “The real bottlenecks now sit after approval, where many approved projects are not being built because they don’t stack up financially or due to a lack of enabling infrastructure,” Collins said. Treasury’s Housing and Infrastructure division head Ben Rimmer said resolving how enabling infrastructure is funded and sequenced would do as much for delivery as planning reform. “When everyone is certain about how enabling infrastructure is going to be delivered, and when, and in what sequence, and who pays for it, you can actually run the numbers on a development with confidence,” he said. ▲ NHSAC chair Susan Lloyd-Hurwitz: We will all need to stay the course and not be distracted by quick-fix, demand-side policies. Victorian Department of Transport and Planning deputy secretary Colleen Peterson said applicants must navigate multiple agencies and up to 50 pages of conditions rather than building homes and called for broader government action to move approved projects into construction. Gupta identified labour supply as a binding constraint. “We simply don’t have the workforce,” he said. The Property Council welcomed $45 million in Federal Budget funding to streamline EPBC Act approvals through a single-touch process, with bilateral agreements designed to cut duplication across states and territories. Lloyd-Hurwitz said there was no single fix. She said improved co-ordination, infrastructure planning, renter protections, and tax reform wer all needed simultaneously. Modular and prefabricated construction was raised as a partial response to cost and complexity. Peterson was direct about what is required. “The biggest thing we can do to build resilience into the system is to actually get supply moving.”

Exclusive
Leon Della Bosca
Thu 30 Apr 26

Conflict, Construction Costs Squeeze Housing Accord Gains

Get the full story.

‘Faster than HDA’: Newcastle Slashes DA Approval Times in Half

Sunset Clauses Under Scrutiny as Class Action Costs Developer Millions

Perth Steel Dynasty Bets Big on Brisbane Pipeline

Backyard Density Could Fast-Track Australia’s Housing Supply

Expectations Shift as Apartment Buyers Rewrite the Rules

In conversation with Paul Salter | Managing Director, Salter Brothers

2026 Hotel Developer Summit | Panel | Arnaud Millecamps, Trudy Crooks & Ivy Cheng

2026 Hotel Developer Summit | Panel | Nigel Greenaway & Letitia Vitale

25Hours Hotel, The Olympia | Tim Greer | Director, TZG