Australia’s residential building industry enters 2026 with strong housing demand, but small businesses remain cautious amid rising costs and policy uncertainty.

Research from the Housing Industry Association (HIA) shows that 59% of small business members surveyed do not expect to increase profits this financial year compared to last.

HIA chief executive – industry and policy Simon Croft says that without reasonable returns, small businesses lack the capital to take on new projects or invest in operations and staff, creating a cycle that is difficult to break: “Many members report that high insurance costs, labour shortages and persistent planning delays are limiting new work and investment decisions.”

Margins are expected to remain tight as builders continue to absorb rising labour, material and regulatory costs, while delays in approvals and financing slow projects before they start.

“Lifting confidence, and the viability of small businesses, in the building sector must be a priority if governments are serious about tackling Australia’s housing shortfall and meeting the target of 1.2 million homes,” Simon says.

He adds that governments could make an immediate difference by accelerating planning approvals, cutting unnecessary red tape and supporting workforce growth across the construction sector.

“If confidence remains weak, fewer homes will be built. Improving conditions for builders is one of the fastest ways governments can help unlock new housing in 2026 and beyond,” Simon says