Treasury official admits new home completions behind schedule despite pausing of National Construction Code

A Treasury official has acknowledged Labor’s plan to tackle Australia’s housing affordability crisis has failed to boost the sagging completion of new homes, as the Reserve Bank admits first-home buyer support is increasing prices.

With the typical Australian home now costing $1 million, Labor is hoping its national housing target will boost supply.

The Federal Government has since October enabled property newcomers to enter the market and avoid paying lenders mortgage insurance without needing a 20 per cent deposit.

Reserve Bank assistant governor Sarah Hunter admitted Labor’s 5 per cent deposit scheme for first-home buyers had boosted demand at the lower end of the market since it debuted in October.

“Unsurprisingly, we have seen a pick-up in first-home buyers who are obviously, many of them are now covered by the scheme,” she told senators late on Wednesday.

“We can see that coming through in terms of activity. It’s provided some support to prices but again, particularly in those markets that first-home buyers are active in.”

Housing Minister Clare O’Neil last year paused changes to the National Construction Code until 2029, hoping this would help with Labor’s plan to build 1.2 million homes over five years to cope with immigration-fuelled population growth.

But Nicholas Dowie, Treasury’s first assistant secretary from the department’s housing group, admitted that change had failed to produce an increase in new home completions.

“In terms of the number of completions, we do acknowledge that we have a way to go in terms of hitting the accord target of 1.2 million homes,” he told the Senate committee on productivity.

Mr Dowie said pausing changes to the National Construction Code was just one element of trying to “reduce the cost of construction”, under questioning from Liberal frontbencher Andrew Bragg.

“Pausing is one component of it. The NCC modernisation project is actually designed to get to a better way of how we can actually codify what building regulations are and deliver them in a more cost-effective way,” he said.

“I’ve personally met with the minister I think once or twice about this matter.

“Certainly, others in Treasury have been meeting with her on this issue and more broadly around the issue around what it is we can do to build more homes more quickly and this is very much part of that.”

During the first 18 months of the National Housing Accord, 262,592 new homes were completed which was 97,408 behind Labor’s target, Australian Bureau of Statistics figures released this month showed.

The completion rate of 43,536 during the December quarter of last year was also below the 46,349 level of the June quarter of 2024 before the accord came into effect, with quarterly home completions failing to improve since Labor’s five-year target began.

Home completions have been falling since stricter National Construction Code rules, to incorporate energy efficiency, were introduced in 2018, with quarterly completions in recent years well below the 57,190 rate of the September quarter, 2018.

Mr Dowie claimed there were “green shoots of recovery” despite new housing commencements, during the first 18 months, of the accord running 77,498 behind target, with 282,502 starts instead of 360,000.

The December quarter starts tally of 53,567 was nonetheless at a four-year high.

“The productive capacity of the housing system is increasing,” he said.

“We’re seeing more approvals, we’re seeing more houses starting which will flow through to higher commencements.”

National Construction Code changes had added between $3600 to $30,000 to the cost of building a new house in Australia during the past seven years, Productivity Commission estimates showed.

“We did look at the contribution of the NCC changes to that cost. There is a wide variety of stated costs out there in the literature — we looked at the regulatory impact statements and also the industry estimates,” the Productivity Commission’s acting assistant commissioner Paul Gardner told senators.