Why We Are Still Short on Homes Even as Prices Drop

Australia completed 355,817 homes in the first two years of the National Housing Accord. To stay on track, it needed to complete 480,000 by the end of June 2026.

That leaves a shortfall of 124,183 homes.

The target requires an average of 240,000 completed homes each year. Reaching it is not simply a matter of approving more developments. Those approvals need to turn into projects that builders can finance, staff and finish.

There are already large numbers of homes under construction, but a home that is still being built does not provide accommodation to someone who needs it today. The industry needs to complete homes at a much faster rate to catch up.

Building more homes takes more than land and approvals

There are several pressures on housing construction, including rising costs, labour shortages and delays. The National Housing Supply and Affordability Council reported that house construction costs rose by 2% in the June quarter of 2026 and were 51% higher than before the pandemic and its associated supply chain disruptions.

Higher costs make it harder for some projects to proceed. A development might have suitable land and planning approval, but if the cost of building it is too high, the numbers might no longer work.

The same applies to labour. Builders need enough qualified tradespeople to carry out the work. When workers are in short supply, projects can take longer, costs can rise and fewer homes can be completed within a given period.

Data centres are adding to the competition for workers

Australia is also seeing a major increase in investment in data centres, driven by demand for artificial intelligence and cloud computing.

Commonwealth Bank research estimated that the potential value of Australia’s announced data centre pipeline could reach around $220 billion if the full six-gigawatt pipeline were completed and fully fitted out. Its central estimate was around $150 billion in investment by 2030. These are different measures: the larger figure represents the potential value of the full pipeline, not a confirmed amount of spending.

These projects need specialised workers, including electricians, technicians and other skilled tradespeople. Housing construction needs skilled workers too.

A report from Powering Skills Organisation estimated Australia would need an additional 72,000 electricians, technicians and related tradespeople by 2030 to meet projected demand. It identified data centre construction as one of the factors increasing pressure on the workforce.

This does not mean data centres are responsible for the housing shortfall. Australia was already struggling to build enough homes. But major infrastructure and technology projects are competing with housing construction for some of the same workers.

If the available workforce does not grow quickly enough, the construction industry will have to manage competing demands across housing, energy, transport and data infrastructure.

Why this matters even when property prices fall

A drop in house prices does not automatically solve the shortage of homes. The price of an existing property is influenced by buyer demand, borrowing capacity, interest rates and the number of properties available for sale. The housing shortage is a separate issue involving how many homes are available to accommodate people.

When construction falls behind demand, buyers and renters still need somewhere to live. Fewer completed homes mean fewer new options for people looking to buy or rent.

Construction delays and higher building costs can also affect the feasibility of new developments. If fewer projects proceed, the supply of new housing becomes harder to increase.

For investors, this is one reason to look beyond short-term price movements. The number of homes being built, local employment, rental demand and competing housing supply all matter when assessing a property.

What I would focus on

I would not base a property decision on the assumption that falling prices will continue or that the housing shortage will automatically push prices higher.

I would focus on the property itself and the local market.

• Established houses: Look at properties that already exist rather than relying on a future development being completed.
• Local employment: Check what supports demand in the area and whether employment is spread across several industries.
• Rental demand: Understand who rents in the suburb and what drives demand for housing there.
• Competing supply: Check how much new housing is planned or being built nearby.
• The numbers: Make sure the purchase price, expected rent and ongoing costs work without relying on future price growth.

A national housing shortage does not make every property a good investment. Location, property quality, purchase price and local demand still matter.

Final word

Australia completed 355,817 homes in the first two years of a five-year target to build 1.2 million. It needed 480,000 to stay on track, leaving a shortfall of 124,183 homes by June 2026.

At the same time, data centres and other major projects are adding to demand for skilled construction workers. Australia needs more homes, but it also needs enough workers to build them.

Falling prices can create opportunities for buyers, but they do not solve the shortage on their own. Until completed housing supply catches up, affordability will remain a bigger issue than the latest change in house prices.