Lower interest rates and stable costs are improving affordability and lifting supply but Australia is on track to fall 262,000 homes short of its five-year target, the National Housing Supply and Affordability Council says in its State of the Housing System 2025 report.

The 938,000 homes the country is forecast to build over the period to June 2029 is up from a forecast 903,000 new homes the federal government’s advisory council made last year and reflects cyclical improvements in the economy, council chair Susan Lloyd-Hurwitz said. But the revised forecast total still falls short by 262,000 of the 1.2 million new homes the federal government has pledged to deliver the next five years.