Victoria’s housing market is grappling with a significant downturn, potentially resulting in over $1 billion in lost social benefits, including higher wages for Melbourne workers. The Australian Bureau of Statistics (ABS) has reported that the number of new homes commenced in Victoria plummeted to 51,462 in the year up to 30 March 2024, marking a decade low. Meanwhile, completed builds have hit their lowest point since 2016, with just 55,773 completions.
These alarming figures have prompted the Property Council of Australia to voice concerns that Victoria is “starting from behind the line” as it embarks on an ambitious plan to construct 800,000 homes over the next decade and more than two million by 2051.
New research from FTI Consulting suggests that if Victoria achieves its 2051 housing goals, including a major shift in construction from Melbourne’s fringes to established suburbs, the state could benefit from a $1.6 billion windfall. This figure includes savings from reduced infrastructure and road congestion costs, increased business productivity, and potentially higher wages for workers.
FTI Consulting’s managing director, Lars Rognlien, stated that reaching the state’s construction targets would directly correlate with the estimated $1.6 billion in social benefits. “If you get half the target, you get $800 million,” Rognlien explained. However, if Victoria only meets half of its construction goals in established suburbs but fully achieves targets in fringe areas, increased infrastructure costs could lead to a $1.5 billion loss in social benefits.
The FTI report does not account for potential improvements in housing affordability. Despite this, Rognlien noted that significant changes are necessary to meet the state’s ambitious goals, as current construction and financing costs deter potential buyers. He suggested that lower interest rates and higher values for newly built properties might be essential to stimulate the construction market.
The Property Council of Australia underscored the urgency of the situation. National figures from the ABS revealed a 9.1 percent drop in the number of homes completed, falling to 41,329 between the end of 2023 and March 2024. This decline highlights the need for a substantial increase in construction pace to meet national and state housing targets. If housing supply remains at current levels, the country will only manage to build around 830,000 homes over the next five years, leaving a shortfall of 370,000 homes. For Victoria, the target is even more challenging, with a goal of 80,000 homes per year—an ambition that exceeds the state’s historical performance.
The Allan Labor Government’s housing promise is under scrutiny as new data reveals a continuing decline in new builds. Despite promising to build 80,000 homes each year for ten years, new ABS data shows just 55,653 homes were built over the past 12 months, down 2,698 from the same time last year. This data confirms that since Labor announced their Housing Statement in September 2023, the rate of new homes being built in Victoria has fallen.
Since coming to office, Labor has introduced or increased 56 taxes and charges, including 30 that are property-based, with taxes making up more than 40 percent of the cost of building a home. Shadow Minister for Planning, James Newbury, commented, “This new data proves that the Allan Labor Government’s damaging policies have hurt the property sector and caused the industry to go backwards. Premier Jacinta Allan needs to drastically scale back her harmful property tax agenda.”
Addressing the housing shortfall is critical for meeting population demands and exerting downward pressure on housing prices for renters and buyers. Melbourne’s housing market—inner, middle, and outer suburban areas—must be revitalised to ensure that supply meets growing demand and stabilises housing costs.
The data highlights the broader challenge facing Victoria and the nation. The housing market’s performance in the coming years will be crucial in shaping economic and social outcomes. Policymakers, developers, and the construction industry must collaborate to find innovative solutions that address barriers to new housing developments and ensure that targets are met.
Immediate and concerted efforts to ramp up construction are essential. Without these, the economic and social benefits of increased housing supply may remain elusive. This period of adjustment will require strategic planning and action to overcome current market obstacles. The stakes are high, and the need for a proactive approach is more pressing than ever.
The housing market’s current trajectory underscores the need for a comprehensive review of policies and practices that can support increased housing development. Reducing regulatory barriers, providing financial incentives, and streamlining approval processes could accelerate construction rates. By fostering a more conducive environment for housing development, Victoria can move closer to achieving its ambitious targets and reaping the associated social and economic benefits.
As the situation evolves, stakeholders must stay engaged and responsive to the housing market’s dynamics. Continuous monitoring, assessment, and adaptation will be key to navigating this challenging landscape and ensuring that Victoria’s housing goals are met.
Ultimately, the aim is to create a sustainable and thriving housing market that meets the population’s needs and supports broader economic growth. Achieving this will require innovation, collaboration, and a steadfast commitment to addressing challenges head-on. The future of Victoria’s housing market hinges on the actions taken today, and there is no time to lose in making the necessary changes to secure a prosperous future for all.
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