Boom-and-bust cycle slowing home building, report finds

A new AHURI report led by RMIT researchers has found market volatility is the biggest barrier to lifting housing construction in Australia, with boom-and-bust cycles disrupting labour, costs, timelines and quality across the sector.

The findings come as Australia tries to lift housing supply under the National Housing Accord, which aims to build 1.2 million new homes over five years to June 2029.

Led by RMIT University Associate Professor Andrea Sharam, the 18-month report involved 19 researchers from seven universities and examined both detached and high-rise housing construction.

“Our ultimate conclusion was market volatility presented the most significant risk for builders, and the biggest constraint on construction output and quality,” Sharam said.

The report found swings in demand can sharply change the number of homes under construction. In detached housing, a boom year can push the number of homes under construction up by 50,000, while a downturn can reduce that number by 20,000.

In apartments, the effects have also been significant. The 2010s boom drove construction up by almost 300%, before prudential regulation and the withdrawal of Chinese investment contributed to a 30% decline.

“During booms costs spike, labour shortages hit, supply chains are disrupted and timelines blow out,” Sharam said.

“Booms also draw in marginal operators and under-skilled workers, increase pressure to cut corners, and disrupt work scheduling creating task queues.

“Downturns meanwhile cause some permanent loss of labour, wage suppression, loss of knowledge and innovation, and businesses leaving the sector.”

The report also found the sector’s fragmented structure is holding back productivity.

Housing production relies on temporary contractor teams that disband after each project, and small and medium-sized builders continue to deliver half of apartments and most detached homes

According to the report, that makes it harder to transfer skills, retain workers and build long-term capability across the industry.

It also found low margins, limited financial buffers and inadequate enforcement of the building code reduces investment in training and innovation, while increasing pressure to prioritise cost and speed over quality.

“This paradox of being too busy to invest during booms, and too uncertain to invest during busts, creates a persistent barrier to industry-level improvement,” Sharam said.

The report argues that boosting housing construction will require broader reform across the sector, rather than focusing on a single bottleneck.

It points to three priorities in particular: reducing market volatility, strengthening workforce development and improving consistency and enforcement in the building code.

Sharam said governments should avoid policies that stimulate demand as they can mimic boom conditions and instead consider approaches such as social housing investment during downturns to help smooth construction cycles.

“Blaming individual factors, like the planning system, is the biggest myth we need to quash,” she said.

“The National Housing Accord aims to build 1.2 million homes by 2029, it will take significant system-level reforms to get us there.”

Organisations interested in partnering with RMIT researchers can contact research.partnerships@rmit.edu.au.

Overcoming construction constraints for the supply of new detached and high-rise housing is published by the Australian Housing and Urban Research Institute, with RMIT University co-authors Andrea Sharam, Ali Zolghadr, Louise Dorignon, Ron Wakefield and Ehsan Gharaie. (DOI: 10.18408/ahuri5334001)