The Urban Development Institute of Australia’s (UDIA) Housing Index (UHI) for the September quarter 2025 shows Australia remains in the grip of a construction cost crisis, with elevated demand, and weak supply indicators continuing to suppress delivery of new homes across every major market.
“We are not just facing a shortage of approvals, we are facing a shortage of buildable approvals,” said Oscar Stanley, UDIA National President.
“In a cost crisis like this, governments and planning authorities need to focus on approving housing types that can actually be delivered such as greenfield detached homes, small-format housing and low-rise projects that are faster, simpler, and more affordable to construct.”
The September quarter’s UHI shows a quarterly decline in key supply indictors (including dwelling approvals and dwelling commencements) that has weighed down national housing market performance, pushing it into the Below Average performance band.
An uptick in national dwelling approvals staged across the four quarters to March 2025, trended back negatively in the June and September quarters (despite the recent one month of firming approvals in September), placing further pressure on the future supply pipeline.
National dwelling commencements are only forecast to total around 43,000 in the September quarter – 17,000 new homes short of the annual average of 60,000 new starts needed to reach the National Housing Accord Target of 1.2 million new homes by 2029.
Mr Stanley said the current imbalance in supply pipelines has led to new supply being tied up in high-cost projects. This is keeping project from being released to market as high prices required to deliver are unobtainable for many Australians who are locked out of home ownership.
“Approvals alone won’t fix the problem. We need approvals that can be delivered at scale and at speed,” he said.
“States that are proactively approving and servicing new greenfield land supply are best placed to support faster, lower-cost housing delivery and meet their Accord targets.
“UDIA will continue to provide a quarterly ‘health check’ on the new-build market through the UHI, tracking demand, supply and cost shifts across each state,
“It will become clear which states are prioritising housing types that are deliverable in the current cost environment. The UHI will demonstrate where industry can get more homes built, faster, and bring affordability back within reach.”
The current residential market dynamics continue to push up new and established dwelling prices across every State market, leading to a further erosion of housing affordability.
“These extremely challenging housing market conditions underscore the need for all levels of government across the nation to continue working closely with the residential development sector to devise innovative solutions that help unlock new dwelling supply faster and increase the delivery of housing,” Mr Stanley said.
Renters are also impacted by a lack of rental housing with stock availability remaining well below the decade average.
There is some indication that pressure is easing slightly in the construction employment sector with job vacancies now back to around long run average levels. With forward supply pipelines remaining well below market needs, however, workforce capacity is still inadequate to deliver the vitally necessary increase in supply.
“This all means the national housing market will remain mired in the current crisis conditions for at least the next year,” Mr Stanley said.
The Western Australian housing market remains the strongest market across all States and Territories with a UDIA Housing Index result for the September quarter 15 index points higher than the national average underpinned by nation leading supply indicators. However, the Western Australian market (like all other State housing markets) recorded a softening in aggregate market performance in the September quarter.
The nation’s two largest housing markets, NSW and Victoria, remain the weakest States in the nation with both markets remaining in the ‘Weak’ demand-supply performance band. Queensland recorded a subdued September quarter UHI performance, and remained modestly in the ‘Below Average’ performance band. The below two graphics summarises the status of the UDIA Housing Index assessment of the national and each State’s market as at September quarter 2025.
UDIA Housing Index (UHI) National Summary: September Quarter 2025
Source: UDIA; ABS; RBA; CoreLogic