Ray White Chief Economist Nerida Conisbee said a real challenge is whether the country can build the homes it needs now.
Australia is falling short of its housing targets. The federal government’s target of delivering 1.2 million homes in five years is the right one; it would finally allow us to catch up on the homes we haven’t built since 2007. The challenge lies not in the objective itself, but in the ability to achieve it.
We have substantiated this for almost twenty years. Even if demand were to decline, we would still need to deliver around 225,000 to 240,000 homes annually to restore balance. The number of completed projects is currently closer to 190,000. The deficit grows every year if we miss that target.
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Australia has never built 1.2 million houses in five years.
The labor force needed to achieve that level of production simply does not exist. The Housing Industry Association estimates that meeting the national target would require an increase of about 30 percent in skilled occupations. That’s before taking into account retirements or workers leaving the industry. Even with record migration, faster training and higher participation, that kind of growth is unlikely.
It means that the problem is not just about policy or approvals, but about productivity. Each new home still requires dozens of craftsmen on site, working in sequence, with limited efficiency gains from one project to the next. Productivity in the construction sector remains particularly problematic. Analysis by the Committee for Economic Development of Australia (CEDA) found that construction labor productivity (output per hour worked) grew by just 17 percent between 1995 and 2024, while labor productivity in the broader market sector grew by 64 percent over the same period.
The figures are disastrous for housing construction goals.
The solution to both a lack of labor and low productivity lies in changing the way we build.
Modern construction methods, known worldwide as MMC or modular construction, move much of the process to another location. Walls, floors and entire rooms are manufactured in factories, transported to site and assembled in a matter of days. It’s faster, cleaner and requires fewer workers on site. The system replaces labor with precision production.
Australia currently has a low adoption rate, with only about five percent incorporating some form of modular construction. In Sweden it is particularly high at around 84 percent, in Japan at 13 percent, in Great Britain at 16 percent and in the United States around three percent.
The irony is that our circumstances – high wages, labor shortages and strong housing demand – are precisely the conditions that make modular construction work elsewhere. In fact, consulting firm McKinsey identified Australia’s east coast as one of the world’s most suitable markets for modular construction, alongside major cities California, London and Germany.
Ray White chief economist Nerida Conisbee said the solution to both a labor shortage and low productivity lies in changing the way we build.
Regional Australia is even more suitable. It is much more difficult to attract skilled workers to smaller towns, and transportation costs add time and expense to any construction. Modular construction reduces that friction. Factories near regional centers can produce homes and building components year-round and deliver them to multiple communities with minimal on-site labor.
The approach also improves consistency. Quality control is stricter in a factory environment, weather delays are eliminated and waste is reduced. The result is lower costs per unit and a faster path from approval to completion.
The federal government recognized this reality in the 2025 budget and set aside funding to expand modular and prefabrication capacity. The intention is to build the industrial base that can deliver housing on a large scale, reducing dependence on on-site labor. It marks the first recognition by national policy that housing targets cannot be achieved through traditional methods alone
Automation and robotics are central to that transformation. Modbotics, an Australian company, already uses robotic arms and digital design to cut, lift and assemble building modules with millimeter accuracy. Tasks that once took a team of tradesmen days to complete can now be completed by machines in hours. Every factory worker becomes many times more productive.
Additional transactions are needed to achieve the target of 1.2 million homes.
This shift is not about replacing employees, but about using labor more efficiently. In an industry where productivity has barely increased in recent decades, greater use of technology and production methods offers a practical way to do more with the same workforce.
Australia’s housing challenge is ultimately a matter of capacity. Meeting national targets will require faster and more reliable delivery, and this will not be achieved solely through traditional location-based methods. Modular and automated construction can increase production without commensurate labor or costs.
Housing affordability depends on supply, and supply depends on how effectively we can produce new housing. The next phase of construction in Australia is likely to see a gentle transition – from work being done almost entirely on site to homes being largely assembled off site.
Whether or not a robot will build your next home is less of a question; it’s how technology will allow it to be built in the first place.
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