Australia's housing Supply problem may be about to get harder. Speaking at the Australian Financial Review Property Summit on 8 September 2026, Reserve Bank Assistant Governor (Economic) Sarah Hunter said the Central Bank expects dwelling construction activity to start falling "a bit" heading into late 2027 and 2028. That does not mean building stops. Activity would remain positive, but the pace of new completions would slow relative to the prior period. The warning matters because it lands against a backdrop of rapid population growth, ambitious government supply targets and a construction industry that is already stretched. For a market where housing costs feed directly into Inflation through rents, the outlook Hunter sketched carries consequences well beyond the building sector.

What the RBA Said

Hunter was direct about the trajectory. "We are expecting by going into late '27, '28 for dwelling construction activity to actually be falling a bit," she told the summit. The framing is important. She was not forecasting a collapse in homebuilding, but a step down in the rate of activity, meaning fewer homes completed than in the period before.

She also described a sector still running into hard limits today. Developers, she said, continue to report that "we can't get the tradies that we need," pointing to persistent capacity constraints in the construction labour force. On top of that, Hunter flagged a newer pressure: data centres are drawing labour away from other parts of construction, particularly in Sydney and Melbourne. She was careful to caveat the scale, noting it is "still pretty early to know the size" of that effect, but named it as a risk worth watching.

Hunter set these supply constraints against Australia's Demand side. The country has strong population growth compared with other advanced economies, and that keeps demand for housing rising. It is one reason, she said, the Reserve Bank expects house prices to find a bottom and recover. A shortage of supply, meeting sustained demand, puts upward pressure on prices.

The Key Numbers

Housing CPI: +5.0% annually; new dwellings +5.7%. Construction still capacity-constrained by tradesperson shortages. Rents growing above pre-pandemic pace.

What Could Happen Next

The near-term test is whether construction capacity constraints ease. Hunter's account suggests the industry is still labour-constrained now, before the expected slowdown even arrives. Whether more tradespeople can be trained, attracted or freed up will shape how sharp the late-2027 and 2028 easing turns out to be.

Monetary policy remains a moving part. The next Monetary Policy Board meeting is scheduled for 28–29 September 2026, with the cash rate currently at 4.35 per cent and inflation still above the target midpoint. Hunter stressed that a Recession is "not our baseline forecast right now," which frames the construction outlook as a slowdown within continued growth rather than a downturn.

Beyond that, the interplay between government supply targets and the Reserve Bank's activity forecast will be closely watched. If completions fall as expected while demand stays strong, the pressure to accelerate homebuilding, and to resolve the labour bottlenecks Hunter identified, will only intensify.

Conclusion

Sarah Hunter's message at the Property Summit was measured but pointed. The Reserve Bank expects dwelling construction to ease in late 2027 and 2028, even as strong population growth keeps demand for housing high and governments push to build more. With the sector already short of tradespeople, and data centres competing for the same labour in Sydney and Melbourne, the path to more homes looks constrained. Rents are rising faster than before the Pandemic and feeding into inflation, while house prices are expected to recover on the back of the supply shortfall. The Reserve Bank sets no target for property prices, but its outlook underscores how tightly housing supply, demand and inflation are now bound together.