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The number of new houses built in Victoria last year was surpassed by the number of first-home loans issued.
Victorian first-home buyers are turning their backs on building new homes and the traditional Great Australian Dream of a house with a back yard.
Economists have warned it is now “absolutely inevitable” the state’s housing supply situation will grow worse in the coming years.
An alarming Australian Bureau of Statistics data released this month revealed the state built fewer new houses last year than the number of home loans issued to first-home buyers.
The ABS stats show that in 2025 there were 39,543 new loans registered to Victorian first-home buyers, but just 34,983 new houses were completed across the state.
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In a further alarm bell for government plans to build the state out of a housing crisis, it was the weakest year for all new home building including apartments, units, townhouses and houses, contrasted with first-home buyer loans since 2009.
Across all categories, the ABS stats show there were 54,156 new homes completed last year – about 14,600 more than new first-home loans issued.
The last calendar year with a figure worse than that was in 2009, when the state built 1098 fewer new homes than it issued loans to first-home buyers.
First-home buyers were once a mainstay of sales in new housing estates, now builders are finding they’re harder to attract amid rising build costs.
Building industry experts have warned rising building costs are making constructing a home less palatable than in the past given the Victoria’s established housing market has been relatively flat in recent years.
PropTrack senior economist Anne Flaherty said while there had been a recent uptick in approvals, most of that was from sales preceding the latest interest rate rise and the Middle East conflict deepening — which had increased building costs.
“It is now absolutely inevitable that the housing supply issue will worsen over the next decade, unless we come up with some amazing new technology for building homes quickly and cheaply,” she said.
“Long term, that pushes prices up and means more people renting a home or spending more of their income when they do buy a home.
“And that’s not good for society.”
Realestate.com.au senior economist Anne Flaherty says a worsening housing supply crisis is now “absolutely inevitable”.
Housing Industry Association Victorian executive director Keith Ryan said he was getting feedback from builders that they were finding it harder to attract first-home buyers to new housing estates.
“Part of that is driven by more rental stock being released to first-home buyers — and the cost is a big deal,” Mr Ryan said.
“Property prices have stayed barely increasing while costs of building are going up so much that the difference is becoming so obvious that you are often better off getting an existing home than getting one built.”
HIA chief economist Tim Reardon said many of the past year’s Victorian first-home buyers would have purchased an established unit as the cost of building new had become “prohibitively high” by comparison.
“There’s a barrier to building new at the moment,” Mr Reardon said.
“And when buyers decide between buying new or established, when the cost is rising to build, they increasingly tend to buy established.”
The number of new house builds has been rising, but the number of loans to first-home buyers has risen faster in the past year.
The economist said that with housing construction growth forecasts in Victoria the lowest in the nation, the state’s housing market was headed for housing supply issues that would almost certainly increase home prices in the established market.
“What I do expect is that early next year, with the relatively low level of new building, we will start to see established prices rise in Victoria,” Mr Reardon said.
Separate Master Builders’ analysis of Victoria’s first-home lending and housing building data found that over the past six years, there had only been 120,000 new builds completed above the number of first-home buyers.
They noted that in addition to accommodating first-home buyers, new housing also needed to replace older homes as well as to accommodate rising overseas migration, which totalled 473,289 in the same timeline — though there was a 79,814 person population loss to other states.
Master Builders Victoria chief executive Michaela Lihou said a combination of supply-chain instability, cost increases and regulatory obligations were straining the building sector.
Master Builders Victoria chief executive Michaela Lihou says an increasingly complex list of problems facing the construction sector posing “serious risks” to housing supply and prices.
“This poses serious risks to efforts to improve housing supply and affordability, particularly for young Victorians wanting to own their first home,” Ms Lihou said.
“Many builders, particularly small to medium-sized businesses operating under fixed-price contracts, are now confronting escalating costs they simply cannot absorb. Added to this is the uncertainty around further material price rises”.
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