Australia’s construction industry is facing a critical productivity crisis, with new research revealing a 53% decline in physical housing construction productivity over the past three decades. This downturn directly threatens the federal government’s target of delivering 1.2 million new homes by 2030.
In its February 2025 report, Housing Construction Productivity: Can We Fix It?, the Productivity Commission presents compelling evidence of an industry struggling to respond to escalating housing demand and shifting demographic needs. These findings have triggered renewed calls for structural reform from sector leaders and policymakers alike.
Productivity Decline Reshapes Housing Market Conditions
According to the Commission, construction workers today complete about half as many homes per hour worked compared to 1995. Even after adjusting for improvements in average home size and quality, labour productivity has fallen by 12% during the same period.
This performance contrasts sharply with national productivity growth of 49% over the past 30 years. The divergence suggests deep-rooted inefficiencies in housing construction, with serious consequences for affordability and access.
“Every productivity loss translates directly into higher costs and longer wait times for Australian families seeking homeownership,” said Denita Wawn, CEO of Master Builders Australia. “This is not just an industry concern, it’s a social one.”
Beyond statistics, the human impact is growing. Families across Australia report extensive delays in project timelines, complicating decisions related to schooling, employment, and financial planning.
Four Structural Barriers Undermining Productivity
The report outlines four core obstacles that consistently hinder productivity gains across the residential construction sector.
Regulatory Complexity and Delays
A fragmented approvals landscape means that residential building applications can be delayed for months. Local councils often lack the resources or digital infrastructure needed to handle approvals efficiently, while inconsistency across federal, state, and local regulations creates further friction.
This fragmented system contributes directly to extended project delivery timelines, adding uncertainty and costs for both builders and homebuyers.
Resistance to Innovation
Australia’s construction sector has the lowest innovation rate among major industries, with only 24% of firms reporting any recent innovation, well below the national average of 31%. In contrast, sectors like manufacturing and wholesale trade consistently exceed 40%.
Professor Martin Loosemore from the University of Technology Sydney observes, “Innovation resistance in construction is not inevitable. We’ve seen international examples where targeted reforms and incentives helped modernise even conservative sectors.”
Technologies such as modular design, off-site fabrication, and digital project tracking remain underutilised, despite their proven ability to reduce delays and improve cost predictability.
Scale Limitations in a Fragmented Industry
Australia’s homebuilding market remains heavily reliant on small and medium-sized enterprises (SMEs), many of which lack the capital to invest in advanced tools or modern building techniques. The fragmented nature of the industry prevents efficiency gains that larger operators might achieve through vertical integration or scale.
Larger homebuilders like Brooklyn Homes offer an alternative model, combining design, construction, and project management under one roof. This approach allows for better control over timelines and budgets, though it remains out of reach for smaller players lacking equivalent resources.
Workforce Shortages
The sector reported 27,500 unfilled positions in early 2024, equivalent to 2.2% of total construction employment, nearly double the long-term average. This shortage affects every stage of the build process, from trades to site supervision, and contributes directly to slower project completions.
Adding to the challenge is a mismatch between training and industry needs. Many vocational education programs lag behind in equipping workers with skills relevant to modern housing construction methods.
Housing Targets Under Pressure
Australia’s ability to meet the National Housing Accord’s goal of 1.2 million homes by 2030 hinges on improving productivity. The accord requires around 60,000 new homes to be delivered each quarter. However, recent completions have fallen short by roughly 15,000 units per quarter.
The National Housing Supply and Affordability Council projects that without major reforms, total housing supply will fall short by approximately 250,000 homes over the next five years. This would exacerbate an already strained housing market, particularly in major cities where affordability is rapidly declining.
According to CoreLogic, the cost of constructing a standard detached home has risen by 35% since 2019, driven largely by material price hikes, labour shortages, and administrative delays. These pressures continue to push the dream of homeownership further out of reach for average Australians.
Government Outlines Seven Reform Priorities
Reform Priority
Description
Planning System Coordination
Streamline approvals by aligning state, federal, and local processes
Code Review
Overhaul the National Construction Code to remove inefficiencies
Occupational Licensing
Standardise qualifications nationally to improve worker mobility
Innovation Support
Reduce barriers to tech adoption and invest in R&D
Modern Methods
Encourage modular and prefabricated construction
Workforce Development
Expand and modernise vocational training pathways
Data Infrastructure
Improve metrics and data sharing for industry benchmarking
While industry leaders have welcomed these priorities, implementation remains a key concern. Without coordinated execution and accountability, past attempts at reform risk being repeated without lasting impact.
Early Innovation Efforts Offer Encouraging Signs
Despite sector-wide challenges, several firms are showing what’s possible. Companies pioneering modular and prefabricated methods report up to 50% faster project delivery compared to traditional builds.
Under the Design for Manufacture and Assembly (DfMA) model, components are fabricated off-site and assembled quickly on location. This approach reduces weather-related delays and improves build quality through controlled factory environments.
Digital tools are also making inroads. Project management software, 3D building information modelling (BIM), and automated equipment are helping streamline workflows, though uptake remains uneven across the sector.
Forward-looking builders, including Brooklyn Homes, have begun integrating select elements of these technologies to manage growing client expectations around speed, customisation, and budget certainty.
Coordinated Action Required to Drive Long-Term Change
Improving housing construction productivity will require alignment between government, industry bodies, and education providers. Piecemeal reforms are unlikely to address the scale of the problem.
International case studies, such as Sweden’s successful integration of prefabricated housing into its national strategy, demonstrate the importance of sustained government support, including targeted subsidies, tax incentives, and consistent regulatory frameworks.
Australia’s path forward may need to include similar policy levers to encourage broader adoption of efficient practices. Meanwhile, state and territory governments must play a leading role in harmonising standards and accelerating planning approvals.
What This Means for Families and Homebuyers
For prospective homebuyers and those planning to build, the current environment calls for strategic planning and realistic expectations. Experts suggest allowing for a 15–20% contingency in both cost and timelines to accommodate possible disruptions.
Families should consider builders with a track record of adopting efficient construction practices and transparent project management. Firms leveraging modern building methods can often offer clearer timelines and greater pricing certainty.
Buyers can also benefit from tracking ongoing regulatory reforms that may affect build timing, financing eligibility, and site-specific compliance requirements.
Conclusion
Australia’s housing construction sector is at a crossroads. A 53% decline in productivity over 30 years has left the industry ill-equipped to meet today’s housing needs. Without fundamental reform, housing supply will continue falling short of demand, worsening affordability and prolonging uncertainty for would-be homeowners.
The Productivity Commission’s recommendations offer a structured roadmap, but success depends on moving beyond policy proposals to practical, enforceable change.
Governments must prioritise regulatory coordination and innovation support. Builders need to invest in modern tools and scalable business models. Families, meanwhile, should stay informed and work with experienced partners who understand the evolving challenges.
While the path ahead requires significant adjustment, the opportunity exists to reshape Australia’s construction landscape for the better. With focused effort, the sector can become more responsive, affordable, and sustainable, delivering the homes Australians need, when and where they need them.
