Australia’s housing affordability crisis cannot be solved without addressing supply, with global banking leaders declaring that increasing housing supply must be a priority.
According to new research from property advisory firm Herron Todd White, 78 per cent of financial executives believe Australia will achieve better affordability outcomes by expanding housing supply rather than altering tax settings.
The survey, conducted among more than 100 senior banking leaders at the World Credit Union Conference in Sydney last week, has suggested there is a growing industry consensus that physical delivery constraints are at the core of the nation’s housing shortage.
The findings paint a cautious outlook for the property sector, with 41 per cent of global banking respondents predicting that housing affordability will fail to improve over the next five years.
Additionally, 75 per cent noted that population growth has outpaced the industry’s capacity to build new homes, while 63 per cent expect the federal government’s latest tax reforms to weigh on business confidence.
Herron Todd White’s CEO Peter Maloney emphasised that long-term affordability hinges on structural reforms that enable homes to be approved, commenced, and completed faster.
“The message from banking leaders is clear: housing affordability is fundamentally a supply issue,” Maloney said.
“While taxation policy can influence investment decisions, Australia simply needs to build more homes if it wants to improve affordability over the long term.”
He warned that policies discouraging private investment risk exacerbating existing supply bottlenecks. He pointed out that while dwellings under construction have hit a record high, slow completion rates, fuelled by elevated construction costs and extended delivery time frames, remain a central obstacle.
“Private investment has historically played a significant role in delivering Australia’s housing stock. If policy settings reduce business confidence or discourage investment, there is a risk that already significant housing supply constraints become even more pronounced,” he said.
He said governments must prioritise structural reforms that enable more housing to be approved, commenced, and completed.
“Australia’s long-term housing affordability will be determined by our ability to increase supply. Faster planning approvals, faster delivery of new housing, greater investment in enabling infrastructure, improved construction productivity and policies that encourage new housing development will all be critical,” Herron Todd White CEO said.
“Although Australia is not commencing enough new dwellings to achieve the Federal Government’s housing target, the number of dwellings under construction is now at a record high.
“This highlights that completing new housing in a timely manner is a major challenge for the industry and one that directly affects housing affordability.”
Maloney said population growth also needed to remain aligned with Australia’s capacity to deliver new housing: “Without addressing both sides of the equation, affordability pressures are likely to persist across metropolitan and regional markets.”
The tax v supply headache
The banking leaders’ emphasis on supply over taxation comes as the broader property sector grapples with the immediate fallout of the federal government’s incoming tax adjustments.
Recent research from the Australian Property Institute (API) has revealed that federal tax reforms, specifically restrictions on negative gearing and changes to capital gains tax (CGT), have overtaken interest rates as the single primary downward pressure on Australian residential property values.
In the API’s Q3 2026 survey of 265 property professionals, 82 per cent identified negative gearing changes as a main force dampening residential values, knocking interest rate expectations off the top spot for the first time.
The tax policy shifts are already reshaping buyer behaviour well ahead of their July 2027 implementation date.
Major lenders – including ANZ, Commonwealth Bank, NAB, and Macquarie Bank – have tightened serviceability assessments, reducing maximum borrowing capacity for established dwellings by up to 20 per cent for certain investors.
Frontline brokers are also reporting that rather than exiting the market, investors are shifting their focus downmarket into entry-level price brackets, directly heightening competition against first home buyers.
At the same time, public supply initiatives are facing severe headwinds.
A report by the Australian National Audit Office (ANAO) issued a warning that the federal government’s flagship programs – the Housing Australia Future Fund (HAFF) and National Housing Accord Facility (NHAF) – risk falling significantly short of their combined 40,000-home target by 2029.
With only 1,432 homes completed as of May 2026 and delivery arrangements rated as only “partly effective”, the audit office review raised several issues regarding delivery arrangements, suggesting there has been insufficient transparency on program delivery, costs, and impact.
Key issues identified by the Auditor-General included program management, suggesting governance and oversight arrangements were established late and not consistently maintained.
The Auditor-General made five recommendations to strengthen the management of the schemes, all of which were accepted by Treasury.
Recommendations include improving governance and information management arrangements, regularly assessing program risks and the effectiveness of controls, and strengthening risk oversight by clarifying responsibilities and ensuring risks are regularly reviewed.
In its report, the Auditor-General also called on Treasury to establish clearer measures of delivery efficiency and improve public reporting on program performance, including progress against targets and broader outcomes.
“There is a risk that the programs may not achieve their intended outcomes unless Treasury strengthens its management of governance, risk and performance arrangements,” it said.
[Related: Tax reforms eclipse interest rates as top house price drag: API]
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