Supply, supply, supply—Australia’s housing supply challenge is often framed as a question of whether the construction industry can physically build enough homes.
But what about demand, demand, demand: who is going to buy them?
How do we get to the target 240,000 new homes?
The National Housing Accord targets 1.2 million new well-located homes over the five years to June 2029, equivalent to 240,000 dwellings per annum.
A comparison with calendar 2015, the last (and only) period annual approvals were around the 240,000 mark, is instructive.
Back then, Quantify estimates around 117,000 new dwellings were supported by owner-occupiers, alongside approximately 83,000 local investors and 38,000 overseas purchasers, with a minimal 4,000 being public housing.
Fast forward to FY2026 and the composition is markedly different. Some 206,000 new dwellings were approved for construction; up an encouraging 9% from the 188,000 approved a year earlier, but nowhere near the 240,000 target.
Despite emerging affordability challenges, owner-occupiers are more than pulling their weight, accounting for an estimated 123,500 purchasers, slightly above the 2015 benchmark.
The shortfall sits overwhelmingly on the investor side of the equation.
The Investor Shortfall
Local investor demand remains well below the levels seen in 2015, while overseas buyer activity is only a fraction of its previous contribution. BTR and slightly more public housing have filled some of that gap, but nowhere near the scale required.
This distinction matters because increasing housing supply ultimately requires more than rezoning land or accelerating planning approvals. Developers not only need confidence that they can sell their product, but also at prices that support project feasibility.
The apartment market is particularly dependent on this equation. Larger projects require substantial pre-sales before construction finance can be secured. With owner occupiers more reluctant to buy off-the-plan, and already doing the heavy lifting, investors are needed to underwrite pre-sales.
However, it could be argued that we may not see the likes of 2015 again, when a combination of Baby Boomers looking to set themselves up for retirement and overseas investors keen to park their money in a more stable environment drove unprecedented private investor demand for new dwellings.
Can BTR fill the gap?
Build-to-rent provides a useful alternative because it replaces hundreds of individual investors with a single institutional owner and reduces pre-sale risk. Federal policy has explicitly sought to attract additional institutional capital into the sector through tax settings designed to improve BTR viability.
But the scale remains the issue.
BTR can become a meaningful part of the solution, particularly for larger apartment projects, but it would need to expand considerably from current levels to offset the decline in traditional investors. However, setting aside whether this is good for the market, raising BTR completions from their recent level of 6,000 per annum to as high as 10,000 or 20,000 BTR dwellings annually would still leave a sizeable gap if local and overseas investor participation remains subdued.
The housing target therefore cannot be considered solely as a construction target. It is also a demand and investment target.
Owner-occupiers appear capable of supporting roughly the level of new housing they did when Australia last approached 240,000 approvals. The harder task is rebuilding the other half of the market.
If Australia genuinely wants to sustain 240,000 new dwellings each year, the policy conversation needs to extend beyond simply making homes easier to approve and build. The challenge is to create a market in which new housing is affordable and attractive enough for private investors, institutional BTR capital and public housing providers to support the additional supply required, while improving the cost equation for development to ensure projects are financially feasible for developers to deliver at prices that can stimulate demand.
At Quantify Strategic Insights, we help governments shape effective housing strategies, support developers in identifying opportunities, and guide investors in understanding risk and demand across the housing spectrum. With deep expertise and market-leading data, we are uniquely positioned to help stakeholders navigate the machinations of the Australian residential market.
For more information, contact Angie Zigomanis at [email protected] or Rob Burgess at [email protected]
