NSW to miss housing targets by 74,000 homes, new forecasts predict

High interest rates and a desperate shortage of builders will cripple the Minns government’s plans to build 75,000 homes a year, a peak housing body has warned.

High interest rates and a desperate shortage of building apprentices will hamstring the Minns government from meeting its targets to build 75,000 homes a year, a peak housing body has warned.

NSW will fail to meet its five-year housing target of 377,000 homes by almost 74,000, according to disturbing new forecasts from the Master Builders Association.

The dire forecasts have worsened since April, when the MBA calculated the state would only fall shy of the targets by almost 29,000 homes.

Master Builders Association (MBA) NSW executive director Brian Seidler said indications from the Reserve Bank that there would be no cuts to interest rates this year meant less houses would likely be built as developers waited for relief.

“The demand for the need for housing is there - they’re just not signing the contracts and getting the shovels in the ground because there is an expectation interest rates will start to lower so developers are holding off,” he said.

NSW will fail to meet it’s five-year housing target by almost 74,000 homes according to new forecasts. Picture: Jonathan Ng

Last week RBA governor Michele Bullock warned there would be no cuts to interest rates in the “near term”.

As a result, housing forecasts dropped, with NSW unlikely to even build more than 60,000 houses per year until 2026-27. Over the five years to 2029 it is predicted the state will never produce as much as the required 75,000 homes per year, instead maxing out at 68,128 homes in 2027-28.

Mr Seidler said high interest rates and building costs were only part of the problem, with a shortage of builders exacerbating the delays.

“It’s clear we just don’t have the builders,” he said.

“There should be incentives for builders to take on apprentices - we have more young Australians interested in apprenticeships than we have builders wanting to put them on.

“In the first one to two years apprentices are not that productive because they’re learning - so during that period of time there needs to be some form of incentive to the employer to take them on.”

Paul Scully, Minister for Planning and Public Spaces with NSW Premier Chris Minns. Picture: NCA NewsWire / Nikki Short

Just over 43,000 new homes commenced in NSW over the year to March 2024, a rate that will need to greatly increase. Yet the MBA report warns higher density projects such as large apartment buildings may not be financially viable due to high labour costs and blown-out build times.

This comes after the Daily Telegraph revealed last week councils across Sydney were dragging the chain on approving development applications for new homes with Georges River and Willoughby councils among the worst, taking far more than 200 days to assess.

Furthermore, MBA have said the length of time from approval to housing completion has also blown out. New apartments now take an average of more than 30 months to build, whereas back in 2019, completion took an average of 26 months.

In the same time period the time to build a house rose from more than nine months to more than 11.

NSW Planning Minister Paul Scully said more work needed to be done to speed up housing.

“We all need to improve our performance when it comes to approving more homes,” he said. “Local government, the Planning Department and interagency referrals all need to speed up.”