10 Australian Cities Struggling to Keep Up with Housing Demand

Australia is aiming high with its National Housing Accord—setting a target of 1.2 million new, well-located homes between July 2024 and June 2029. But even in the early stages, it's becoming clear that many local areas are already falling behind. The housing challenge isn’t just national; it's deeply local—and the strain is starting to show.

In this article, we dive into the numbers at the Local Government Area (LGA) level to spotlight the 10 regions most behind on housing approvals—and explore why the national goal might not be achieved unless major bottlenecks are addressed.

Why the 1.2 Million Homes Goal Is at Risk

Let’s start with the bigger picture. The national target requires around 1.2 million building approvals by June 2028, allowing a one-year window for construction. But as of early 2025, Australia is falling short on multiple fronts:

Completions are not keeping up with commencements: In 2022, the gap between starts and completions was 24%. In 2024 so far, a 20% shortfall persists—with longer timelines for high-density housing amplifying the issue.

• Approvals are below where they need to be: In 2024, only 162,071 building approvals were issued—32% below the 240,000 needed for the year.
• Regional breakdowns show widespread underperformance: Only the ACT is currently on track. Most other capital cities and regions are struggling, with some seeing approval gaps of up to 79%.
• These shortfalls, if not corrected, mean the country may only deliver around 1 million homes by 2029—well under the 1.2 million target.

Australia’s Housing Target: Are We On Track?

A few weeks back, we examined the challenges in achieving Australia’s ambitious goal of delivering 1.2 million homes by June 2029. The short answer? It's unlikely to be met without major acceleration.

But progress varies across the country. This time, we’ve zoomed in on the LGA level to see exactly where the gaps are most severe. But before lets have a look on what is holding supply back? 

What’s Holding Supply Back?

The housing supply crunch isn’t due to lack of intent—it’s a complex storm of rising costs, limited land, and struggling construction firms. Here's what’s dragging the market down:

1. Soaring Construction Costs: Material prices have skyrocketed since 2020, and although growth has slowed, costs remain high. Components like concrete, bricks, and electrical systems are still seeing price increases. Labor costs are also rising due to skill shortages and heightened competition from government infrastructure projects.

2. Land Supply Constraints: In 2023, the release of subdivided residential land fell by 26%—a drop that’s tightened supply and pushed land prices up. Capital city land now averages over $1,000/m², with Sydney topping $1,500/m².

3. Builder Insolvencies: Profit margins are squeezed by fixed-price contracts, rising costs, and cash flow pressure. Insolvencies have surged, with 30% of construction firms now operating at a loss. Confidence in the sector has taken a hit, pushing some builders to niche markets or out of the industry entirely.

How Did We Determine Which Cities Are Falling Behind?

Step 1: What’s the target number of approvals?

To stay on pace for 1.2 million new homes by June 2029, the country needs that many building approvals by June 2028. Since we’re 20 months into the five-year window (as of January 2025), roughly 400,000 approvals should be in place already.

Step 2: How much should each area contribute?

Rather than dividing the target based solely on population size, we used each area’s share of national population growth for FY23–24. This method aligns housing demand more closely with actual growth patterns, though it’s not without trade-offs.

For example, Greater Geelong added 6,778 new residents during that period, while the national population grew by 541,592. Based on that, Geelong’s share of the housing approval target is proportional to its population increase.

Step 3: Comparing actual vs. expected approvals

Once each area’s target is defined, we can compare that to the actual approvals recorded between June 2023 and January 2025.

Geelong, for instance, approved 4,989 new homes—just slightly below its expected figure, indicating it's mostly on track. Unfortunately, the same can’t be said for many other areas.

Zooming In: Which Cities Are Lagging the Most?

After analyzing data across 533 LGAs, we found that 146 are currently trailing their expected approval targets. Here are the 10 cities with the most significant shortfalls:

Key Trends

1. Greater Perth (Cambridge, Victoria Park, Fremantle): Despite growing demand, many Perth suburbs are struggling to secure enough approvals—hindered by construction cost pressures and workforce shortages.
2. Greater Sydney (North Sydney, Georges River): Even with different population dynamics, both LGAs are missing targets. Sydney overall saw a 45% approval shortfall in 2024, worse than most capital cities.
3. Greater Melbourne (Frankston): In contrast to booming areas in Melbourne’s west, the more established eastern suburbs like Frankston are struggling to match demand with new supply.
4. Queensland (Brisbane, Gladstone, Rockhampton): Strong population growth isn't being met with enough new housing, contributing to Queensland’s ongoing housing affordability issues.
5. Greater Darwin (Palmerston): Even with moderate growth, this region is behind by over half its target, worsening the NT capital's supply-demand imbalance.

What This Means for Buyers and Investors

The ongoing underperformance in housing approvals is not just a construction challenge—it’s a market signal. With demand still strong and supply not keeping pace, price pressures and competition are only likely to increase. Investors, in particular, should be paying close attention.

While the national goal of 1.2 million homes may remain out of reach, this persistent undersupply creates opportunities for strategic investment—especially in areas where demand remains high but supply pipelines are thin.

Final Thoughts

Australia's housing crisis won't be solved overnight. Construction delays, labor shortages, land constraints, and financial instability in the sector all make the 1.2 million homes target highly ambitious—if not unlikely.

Yet, this very shortfall opens doors for those who understand the data and move with insight. Whether you're an investor, buyer, or policymaker, the message is clear: housing supply is not keeping up with growth, and the gap isn’t closing fast enough

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