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{{propApi.successMessage}} {{region}} Change locationHigher rates, fewer homes
Higher rates, fewer homes
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The Reserve Bank of Australia (RBA) delivered its fifth rate hike this year, sending the benchmark cash rate up to 4.85 per cent - its highest level since November 2008, which was during the Global Financial Crisis.
“On the current trajectory, Australia is expected to fall around 200,000 homes short of meeting the 1.2 million new dwellings set by the National Housing Accord. This will only make things worse.
“Higher interest rates are reducing the capacity of households to purchase a home and the volume of new homes delivered by the industry.
“The impact of higher borrowing costs is already turning up in leading housing indicators. New home sales in the September quarter 2026 remained at their lowest level in 18 months.
“Other indicators of home building activity such as new housing finance and approvals have yet to slow given earlier built-up work in the pipeline.
“As that pipeline shrinks, the industry is set to deliver fewer homes than otherwise, which will compound the housing affordability challenge.
Ms Martin said that while some of the factors influencing the upward pressure have been imported, more must be done to address local challenges impacting interest rates and home building.
“The challenge of building more homes should not be predicated on interest rates alone. All three tiers of government need to lower the cost of delivering more homes,” said Ms Martin.
“While interest rates impact affordability in the short term, it is the cost of delivering new homes to market that determine longer-term, structural affordability.
“Reducing taxes, infrastructure charges, regulatory costs and delays imposed on new housing would improve affordability while increasing supply.
"The housing sector depends on stable, long-term investment to turn land into new communities and homes. Yet governments continue to erect barriers for the very investors willing to fund that supply, whether through foreign investor surcharges, unnecessary restrictions or higher taxes on housing investment. We should be encouraging capital that helps deliver more homes, because every additional barrier ultimately makes it harder to address Australia's housing shortage.
“Governments must also pay greater attention to the role public demand is having on the economy and therefore interest rates. This should not be a burden carried by the private sector and consumers alone.
“Finally, if Australia is to make meaningful inroads into our housing shortfall, the federal government must recognise the cascading impact that regulation and taxation is having on the efficiency and viability of construction businesses, and therefore the capacity to deliver new housing,” concluded Ms Martin.
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