2024–25 is the worst year for the ACT’s home building industry in two decades, and Canberra’s building and construction industry faces a challenging future, due to rising interest rates, a global fuel and supply chain crisis, and geopolitical tensions, Master Builders Australia’s latest report states.

Only 2,082 new homes were started, down 53.8 per cent on the previous year.

“This marks the weakest performance in the home building sector for nearly two decades,” economist Shane Garrett said.

Higher density commencements fell 62 per cent.

The ACT has set a target of 21,000 new homes by 2029 (4,200 per year) under the National Housing Accord, but after 18 months is already running 1,150 homes behind. Overall, the report projects a 6 per cent shortfall — roughly 1,240 houses, with a total of 19,793 new homes over the Accord term — despite a strong rebound this year: commencements are expected to more than double to 5,115, and higher density starts to triple. Mr Garrett blamed this on a persistent decline in construction productivity, which fell by 2.8 per cent last year.

The report was compiled before the current Iran war. Mr Garrett warned: “Recent events in the Middle East will make it even more difficult to reach our target because it is getting much more expensive to build new homes.”

Non-residential building fell sharply in 2024-25 (-19.3 per cent), but prospects over the forecast horizon look stronger: Master Builders anticipates $8.37 billion in activity over the next five years, about 32 per cent more than the previous five. The big spike is in 2026-27 (a 59.7 per cent increase), driven largely by social, cultural and recreational building (up 63.3 per cent that year).

Civil and engineering are boosted significantly by Stage 2 of Canberra’s Light Rail, which pushed activity up 36.8 per cent in 2024-25. A further 19.2 per cent growth is forecast for 2025-26, but is likely to be the peak; the market may drift back toward $1 billion by the end of the decade.

Overall, total ACT construction activity is forecast to spike sharply in 2026-27 to $5.52 billion — a 24.1 per cent jump — before falling back across the following three years. The spike is heavily driven by a single year of non-residential surge rather than sustained structural growth.

$8.73 billion worth of non-residential projects is scheduled over the next five years, including social, cultural, and recreational projects.

However, Master Builders says the immediate outlook remains clouded by the ongoing fuel crisis, volatility of supply chain pricing and the cost of materials.

“Building and construction is the fifth largest user of diesel in Australia, and we’ve seen fuel prices surge nearly 80 per cent just this March,” Master Builders ACT CEO Anna Neelagama said. “Without urgent intervention, the risk outlook is obvious: fewer projects, higher costs, and delayed delivery of homes and infrastructure. If we want to protect local jobs and businesses, we need an all-hands-on-deck approach.”

Ms Neelagama said the resilience of the ACT’s building and construction sector is at a historic low, exacerbated by recent geopolitical turmoil, and said stability from both the ACT and federal governments was urgently needed to navigate the turbulent landscape.

“The economic climate has shifted dramatically since the last forecasts in September 2025. Rising interest rates, now at 4.1 per cent, are expected to impact housing delivery and economic activity across the region, along with rapidly rising costs due to the unfolding fuel and global supply chain crisis.

“Without significant and immediate structural change and reform, the outlook for building and construction in the ACT is only set to worsen. The local capability to deliver projects will rapidly deteriorate unless there is adequate support across the board.”

To safeguard the industry, Ms Neelagama said the ACT government must act as a model client on all its projects. She urged the government to commit to fair and transparent pricing, and to revisit Master Builders ACT’s 11 key budget recommendations, including funding training for apprentices, lowering property taxes, and reducing unnecessary red tape.

“Industry simply does not have the same level of resilience after the pandemic,” Ms Neelagama said. “Now is the time to stabilise and support our sector to protect local jobs and ensure the long-term viability of our construction capability.”