For developers and the brokers who arrange their funding, the message is clear: the feasibility margin that worked 12 months ago may not be enough today. This article explains what the UDIA is reporting, why feasibility studies are under pressure, and what kinds of projects are still getting funded.
The housing target is slipping
The latest ABS data shows 47,170 homes were completed nationally in the June quarter of 2026. That brings total completions over the first two years of the National Housing Accord to 355,820.
To stay on track for the Accord's target of 1.2 million homes, Australia needed to have completed 480,000 homes by now. It is about 124,000 behind after two years.
UDIA National President Oscar Stanley welcomed the rise in completions in the latest quarter but warned that, on the current trajectory, the shortfall will grow to around 310,000 homes by the end of the Accord.
Source: ABS; UDIA; Cotality, October 2026.
The 10% squeeze
The most important part of the UDIA's warning concerns what is happening further back in the pipeline. Stanley said evidence across the housing industry shows significant numbers of development projects are being shelved or deferred.
He said industry estimates suggest financing capacity for new projects and the spending power of prospective buyers have both fallen by about 10%. Uncertainty about housing values is also making it harder for developers, financiers and buyers to commit to new projects.
A project has to work on both sides of the feasibility study: the funding to build it, and the buyers who will purchase the finished product.
Why feasibility studies are under pressure
- Costs are still rising. Building costs have risen about 5.4% over the past year.
- End values are falling. National home values have fallen for six consecutive months and are now 5.2% below their March peak, according to Cotality.
- Sales are slowing. Auction volumes across the combined capitals were 38.1% lower than a year ago, and the clearance rate fell to 45.4%.
- Borrowing costs are higher. The cash rate is now 4.60%, which raises holding costs and reduces buyers' borrowing capacity.
- Finance supply is under scrutiny. The RBA's latest Financial Stability Review looked closely at private credit and its role in property lending. See What the RBA's latest Financial Stability Review means for non-bank borrowers and brokers.
Rising costs, falling end values, slower sales and more expensive money reduce a project's margin at the same time. A project that showed a healthy margin on paper a year ago can now be marginal, or not viable at all.
What still gets funded
Funding is still available, but it is more selective. In this market, the projects most likely to proceed tend to share several features.
1. A realistic feasibility study at today's prices
End values should reflect current comparable sales, not peak-market prices. Costs should be based on current quotes, with a contingency suited to the current market.
2. Meaningful equity
Lenders put more weight on the developer's own investment when values are uncertain. Equity is the first buffer if values fall or costs rise.
3. A smaller scale and shorter timeline
Projects that can be finished and sold quickly carry less market risk than large, long-dated ones.
4. More than one way out
If the plan depends entirely on sales, it needs a fallback. That might be a residual stock facility, refinancing to an investment loan, or holding and leasing the completed stock. See Lessons from Bathla: in development finance, the exit strategy is the loan.
5. A capable, well-checked builder
Lenders look closely at the builder's track record, capacity and contract terms. See Before you sign: checking your builder before you take out a construction loan.
6. Committed funding
For staged construction loans, developers should confirm that the full facility is committed at approval, not sourced draw by draw. See After Bathla: what comes next for development funding in Australia.
The longer-term picture
There is an important counterpoint. A shrinking pipeline today means fewer new homes in two or three years, while underlying demand remains. Cotality's research director noted this week that dwelling completions have been flat for an extended period, which keeps housing supply constrained.
For well-capitalised developers, this market can create opportunities: less competition for sites, more realistic land vendors, and completed stock that may be scarce when conditions improve. The challenge is having a structure that can survive until then.
What brokers should do now
- Stress-test every feasibility study. Ask what happens if end values fall another 5–10%, costs rise 5% or sales take six months longer.
- Start funding conversations earlier. More selective lenders need more time to assess deals.
- Prepare the full picture. A submission that clearly shows the costs, equity, current comparable sales, builder details and exit options is far more likely to get a clear answer.
The Funding Door view
Development finance works when the structure matches the project and the exit is credible, and that matters even more when finance and buyers are both under pressure. Projects that are realistically priced, well capitalised and well planned can still proceed in this market.
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