Housing supply still in doldrums, affordability to improve: NHSAC

While the supply of new housing is near its lowest level in a decade, a new report from the government shows that housing affordability is expected to broadly stabilise over the next four years.

The State of the Housing System 2025 report compiled by the National Housing Supply and Affordability Council (NHSAC) found that Australia's housing system continues to experience immense pressure.

This is partly due to dwelling prices rising by 4.9% over 2024 and by a further 0.7% over the first three months of 2025.

Advertised rents rose by 4.8% over the same period and by a further 1.7% at the start of this year.

The council found that the median household income struggled to meet the rise on dwelling prices and rents.

This meant that 50% of median household income was needed to meet repayments for the average new mortgage, while 33% was needed to meet rental costs for the average new lease.

Consequently, the report found that housing affordability deteriorated - albeit at a slower rate than in 2023.

Worryingly, only 177,000 dwellings were completed in 2024, falling significantly short of underlying demand for housing, which was estimated to be around 223,000 for the same period.

The NHSAC said this shortfall added to the already significant unmet demand in the system as the average time required to save for a home deposit increased to 10.6 years, and the ratio of dwelling prices to median household income rose to 8.0.

On a brighter note, affordability is expected to broadly stabilise, and in some cases improve a little, over the next four years.

"Growth in CPI rents is expected to continue to slow, falling below 4% in 2027. The vacancy rate is expected to rise but to remain below 2.5%, implying rental conditions will remain difficult for tenants. The ratio of dwelling prices to income is expected to fall slightly to 7.7, but to remain high," the report read.

NHSAC chair Susan Lloyd-Hurwtiz said affordability continues to be a source of "significant stress" as many Australians find country, securing a home that is affordable, fit for purpose and secure is challenging, if not impossible.

"The deterioration of housing affordability and low levels of new housing supply in 2024 are particularly stark reminders that Australia is still very much in a housing crisis that has been decades in the making," she said.

"However, there are signs of slight improvement in parts of the housing system. Growth in housing prices and advertised rents slowed over 2024 and construction costs have stabilised. This is promising news. Additionally, the supply of social and affordable housing is accelerating, reflecting an increase in government investment and initiatives that encourage private sector investment."

One of its policy recommendations is to increase investment in social and affordable housing through proven mechanisms and reviewing regulatory frameworks for the social and affordable housing sector.

"Governments, and the private and not-for-profit sectors, should commit to consistent investment in social and affordable housing to restore the proportion of social housing to 6% of the housing stock over the medium term," the NHSAC said.

The government should also do more to improve the construction sector capacity and productivity and apply best practice principles to planning systems and ensuring developable land is made available.