Every election cycle, housing affordability dominates the headlines — new schemes, new incentives, new promises. But as investors, we need to separate the political narrative from the economic reality. We don’t form views on headlines. We follow the data — and the data points somewhere most of the public debate does not.

When we examine the data surrounding Australia’s housing market, we arrive at a very different conclusion from much of the public debate. The biggest challenge facing Australian housing is not a lack of buyers.

The housing shortage is real

The Federal Government’s Housing Accord has set a target of building 1.2 million homes over five years — the number of new homes it aims to deliver under current settings.

On paper, that sounds impressive.

However, the National Housing Supply and Affordability Council forecasts Australia will only complete approximately 938,000 dwellings under current settings. That leaves a shortfall of roughly 262,000 homes. Even after all the policy announcements and public commitments, the official forecast suggests Australia will still fall significantly short of its target.

As investors, that is the first statistic that matters. The supply shortage is not a theory — it is already visible in the numbers.

Following the production chain

One of the mistakes many commentators make is focusing solely on house prices. We prefer to analyse the entire production chain. A home must pass through several stages before a family can move into it:

At every stage, delays reduce the number of homes ultimately delivered. The critical question therefore becomes: where is the bottleneck? If we can identify it, we can better understand whether current policies are likely to succeed.

Is council red tape the problem?

Council approval delays are often blamed for Australia’s housing shortage. There is certainly evidence that planning and approval systems can be slow, particularly in major metropolitan areas. But when we analyse the data more closely, council approvals turn out to be only one part of the problem.

Many projects that receive approval never proceed to construction. Why? Because approval alone does not make a project economically viable. A developer still needs construction finance, labour, materials, infrastructure and sufficient profitability. Without these ingredients, an approved project remains a piece of paper rather than a completed home.

The productivity crisis nobody talks about

Perhaps the most overlooked issue in Australian housing is productivity. According to analysis from the Productivity Commission, housing construction productivity has deteriorated significantly over recent decades — on its estimates, we now complete around half as many homes per hour worked as we did in 1995, even as productivity across the broader economy rose. This should concern every Australian.

Consider what has happened elsewhere in the economy. Technology has dramatically improved productivity across banking, investing, logistics, manufacturing and retail. Yet housing construction has not experienced similar gains. In simple terms, Australia is not building homes as efficiently as it once did.

This creates a structural challenge. Even if governments approve more developments, the industry still needs the capacity to physically build them.

Why building costs matter

Many Australians assume developers simply choose not to build. The reality is often more complicated — for a project to proceed, the economics must work. Consider a simplified townhouse development:

If the market will only support a sale price of $850,000, the project may never commence. This is one reason housing shortages can exist at the same time as construction activity slows. Developers cannot build homes at a loss.

The demand side of the equation

Australia continues to experience strong population growth, ongoing migration, new household formation — and limited housing supply. This creates an imbalance: more people require accommodation than there are homes available.

Economics 101 tells us what happens next. Prices rise. Rents rise. Vacancy rates fall. Competition increases. None of this should surprise investors — it is exactly what the data would predict.

Can first-home buyer incentives solve it?

This is where we believe much of the public debate becomes confused. Many housing policies are designed to help people buy a home. That is a worthy objective. However, helping buyers and increasing housing supply are not necessarily the same thing.

Imagine 100 buyers competing for 50 homes. If government assistance allows another 20 buyers to enter the market, there are now 120 buyers competing for the same 50 homes. The number of homes has not changed. In some circumstances, demand-side incentives can actually support prices by increasing purchasing power without increasing supply.

Again, this is not politics. It is economics.

The PMW house view

At Plan My Wealth, we focus on long-term structural trends rather than short-term political cycles. The data currently tells us four important things:

For these reasons, we believe Australia’s housing challenge remains fundamentally a production problem rather than a financing problem. The nation does not simply need more buyers.

What this means for investors

From an investment perspective, we continue to view the structural picture for Australian residential property as shaped by long-term supply constraints — and we weigh forces like this into the broader investment strategy we build for each client. This does not mean property prices rise every year. Interest rates matter. Employment matters. Economic growth matters. Consumer confidence matters.

However, when we step back and analyse the market through a five-to-ten-year lens, the underlying supply-demand imbalance remains one of the strongest forces in the picture. Investors should therefore pay less attention to political announcements and more attention to measurable indicators:

• Housing completions
• Building approvals
• Construction costs
• Vacancy rates
• Population growth
• Labour availability

These are the variables that ultimately determine whether housing becomes more abundant or remains scarce. For anyone approaching retirement, the more important question is how property sits alongside super and the income you’ll eventually draw — which is exactly the superannuation and retirement planning work we do every day.

Final thoughts

Good policy should be judged by outcomes, not intentions. The ultimate test is simple: are more homes being built than households are being formed? At present, the data suggests the answer is no.

Until Australia consistently increases housing supply faster than housing demand, affordability pressures are likely to remain. As investors, we will continue following the numbers rather than the headlines — because markets do not care about political promises. They care about supply and demand. And right now, the data continues to point toward a structurally undersupplied housing market.

Sources & further reading

The figures in this article are drawn from the following primary sources (current as at June 2026):

• Australian Government Treasury — Delivering the National Housing Accord (the 1.2 million-home, five-year target).
• National Housing Supply and Affordability Council — State of the Housing System 2025 (the 938,000 forecast and 262,000 shortfall).
• Productivity Commission — Housing construction productivity: Can we fix it? (the decades-long decline in construction productivity).
• AHURI — Federal measures to tackle Australia’s housing challenges explained (the delivery pipeline and programs).
• Grattan Institute — analysis on demand-side assistance and house prices.
• Australian Bureau of Statistics — Population, Overseas Migration, Building Approvals and Building Activity.