Australia says it wants more homes built. But in recent weeks, a series of decisions has made new housing supply harder, not easier.
The first was monetary policy. The RBA cash rate now sits at 4.35 per cent, with inflation still above the target band at 4.2 per cent for the year to April 2026. Higher interest rates flow straight into housing supply.
Developers face higher finance costs, buyers face lower borrowing capacity, pre-sales become harder, and marginal projects are delayed or abandoned. Regular readers (both of you) will know I don’t believe cash rate/ interest rate hikes will do anything to solve inflation given the weight of other inflationary pressures.
The second was the Federal Budget decision on negative gearing and capital gains tax. From 1 July 2027, negative gearing will be limited to new builds, while the 50 per cent CGT discount will be replaced with inflation indexation and a minimum 30 per cent tax on gains.
Investors in new builds will retain more favourable treatment. The intention is to shift investment into new supply, but the immediate effect is uncertainty. Investors do not respond well to uncertainty, particularly in a market already dealing with high rates, construction delays and rising costs.
The third was the banking response. Macquarie has already changed its serviceability settings, treating the Budget changes as a foreseeable change to borrowers’ future capacity. For investment property contracts signed after 12 May, negative gearing will only be counted where the property is a new build that genuinely adds to supply.
That may be consistent with the policy intent, but it also means borrowing capacity is already being reassessed. If investors can borrow less, or become more cautious, some new projects will struggle to secure the pre-sales needed to get financed.
The fourth was the Fair Work Commission’s wage decision. From the first full pay period on or after 1 July 2026, minimum award wages will increase by 4.75 per cent, with the National Minimum Wage rising to $1,004.90 per week or $26.44 per hour. No one should begrudge low-paid workers a decent wage rise. But we also need to be honest about the effect. In construction, manufacturing, logistics, retail supply and building materials, wage increases flow into the cost base. Those costs either reduce margins, increase prices, or both.
Taken separately, each decision can be defended. Higher interest rates are aimed at inflation. Tax changes are aimed at affordability. Bank serviceability rules are aimed at responsible lending. Wage increases are aimed at protecting low-paid workers.
But taken together, they all point in the same direction. They increase cost, reduce borrowing capacity, weaken confidence and add risk to new housing projects.
That is the problem. Governments say they want more homes, but the policy environment keeps making homes harder to deliver. If the objective is supply, every decision should be tested against one simple question: will this make it easier or harder to build?
Right now, too many decisions are making it harder.
