Intro: A plan built on supply alone
Australia’s National Housing Accord aims to boost affordability by increasing the supply of homes. Signed in October 2022 by the federal government, nine super funds, and housing industry bodies, the pact has consistently promised improvement in affordability as the nation ramps up construction. Yet, three years on, affordability remains under pressure as prices accelerate and approvals falter. This is less a failure of intent and more a reminder that housing markets are driven by both supply and demand.
The numbers tell a mixed story
Since the accord began, the national median house price has risen by about $127,117—roughly $42,000 a year—an understated sign that demand remains robust. In September, prices jumped by 0.8%, the largest monthly increase this year. Meanwhile, housing approvals drift down 6% in August, highlighting a market where supply is not expanding quickly enough to meet demand.
Why does demand outpace supply?
The main driver of price growth in 2025 is not fundamentally new demand but policy-fueled demand, spurred by interest-rate cuts that raise how much existing buyers can pay. The Reserve Bank’s actions have boosted buying power, while the cash rate remains higher than pre-accord levels. A bandaid like the 5% deposit scheme expands the pool of potential buyers, but Treasury modelling suggests its price impact will be modest—about 0.5% over six years—and this may understate the true effects of higher population growth.
The migration factor: population pressure outpacing build rates
Population growth is a pivotal piece of the affordability puzzle. Since October 2022, net migration reached 1.4 million, lifting population by 1.7 million. Yet only 512,000 homes were built in that period. If the typical household is 2.4 people, supply ran about 200,000 units short of demand, helping to push the median price higher. The Accord’s focus on supply, while sensible, may be insufficient without a plan to temper or better align demand with new supply.
The political and practical hurdles
Two key constraints hobble demand management: political reluctance to revisit negative gearing and the capital gains tax discount, and the fact that the RBA did not sign the Accord. Immigration policy and its impact on demand rest largely with government decisions and Treasury projections, which have historically overestimated migration. In short, supply alone cannot forestall price growth if demand remains buoyant.
What’s happening on the ground
States are tasked with implementing the supply targets, and progress varies. Victoria and New South Wales are pushing densification around rail hubs and upgrading existing infrastructure to accommodate more residents. NSW’s plan includes a government guarantee to underwrite a portion of pre-sold apartments to boost finance for developers, a policy that could influence affordability if scaled. Yet other states lag, and there’s a real risk that without a demand-side anchor, the target of 1.2 million homes by 2029 remains out of reach.
Workforce and productivity challenges
BuildSkills Australia flags a constricted workforce: a projected shortfall of 116,700 construction workers is needed to meet the target, with productivity dwindling to levels seen decades ago. Apprenticeships have cooled post-pandemic support, and policy changes to expand the pipeline will take time. Without a robust, scalable workforce, the supply push may falter just when demand remains hot.
Looking ahead: a longer horizon for affordability
The housing affordability challenge is long-term and multi-faceted. The current plan’s success depends not only on more homes but on balancing demand through policies that influence immigration, taxation, and financial markets. Three-year political cycles and the patchwork of state rules complicate the pursuit of steady, meaningful progress. By 2029, the outcomes of today’s decisions will emerge, revealing whether supply-led reform can truly bend the affordability curve—or if demand must be managed alongside new housing.
Conclusion: A more complete strategy is required
In its essence, the National Housing Accord confronts a fundamental truth: housing affordability cannot be solved by building more homes alone. Without mechanisms to temper or align demand with supply, affordability improvements may remain elusive. The path forward likely lies in a balanced approach—maintaining a steady, scalable build program while adjusting demand-side levers to curb runaway price growth.
