KR Peters Director Peter Nicolls fears the Federal Government's National Housing Accord (NHA) designed to encourage more new homes to be built in Australia will amount to nothing unless more land is urgently released for residential development.

In August national cabinet met to thrash out ways to help alleviate Australia's growing housing shortage.

The Prime Minister and state and territory leaders agreed to a new national target of 1.2 million 'well located' homes over five years from July 2024. This is an additional 200,000 new homes above the National Housing Accord target agreed to last year.

The Federal Government also offered states a New Homes Bonus, consisting of $3 billion of performance based funding for states and territories to boost housing supply and meet and exceed their NHA targets

Also in the mix was a Housing Support Program, a $500 million competitive funding program for local and state government for connecting essential services, amenities to support new housing development or building planning capabilities

Prime Minister Anthony Albanese also announced he was bringing forward one of Labor's signature election promises, the Help to Buy scheme which is shared equity to support up to 40,000 low and middle income families to purchase a home.

Mr Nicolls said "in theory these measures are fantastic" but he is concerned that very little will actually result while land is scarce, construction costs are high and skilled tradies are in short supply.

"We need the extra homes on top of what they agreed to last year because immigration is up again and those people need housing. No ifs or buts," Mr Nicolls said.

"But to build a house is like putting a hamburger together. You need the roll, the patty, lettuce, tomato, cheese. The first ingredient you need to build a house is land and at the moment there just isn't enough land being opened up."

New home sales figures compiled by the Housing Industry Association show a slump that could result in a 'decade low' of home building in 2024 unless more land is released for residential development.

Sales of new homes across Australia fell by 2.4 per cent in July according to the HIA New Home Sales report. The decline in July leaves sales in the 3 months to July 2023 down by 33 per cent compared to the same period in 2022.

The plunge in new home sales was led by Queensland (-52.3 per cent) and followed by New South Wales (-48.4 per cent), Victoria (-37.2 per cent) and South Australia (-26.0 per cent). Sales in Western Australia bucked the trend increasing by 17.3 per cent.

Mr Nicolls said the figures show that the building industry is currently in troubled waters.

He called on the State Government to expedite the approval of Precinct Structure Plans (PSPs), which determine exactly how planned communities on the urban fringe will develop.

"PSPs and the whole planning system needs to be fast tracked," Mr Nicolls said.

He pointed to areas like Little River near Avalon and vacant land near Hidden Valley as prime examples of land ripe for development. Instead he says it's like "they've been put to sleep".

It appears the State Government is focused on encouraging higher density living in already established areas, particularly in suburbs near transport hubs.

"To bring on more land supply, the government has to come out with a clear vision and a plan as to where the land will come from."

Mr Nicolls said contributing to the lack of confidence in new home sales, was the continued collapse of building companies which has undermined consumer confidence and forced other builders to step in and finish work started by the likes of Porter Davis.

The industry was also battling price pressures for materials and a shortage of trades people.

"With all the major builds going on in Victoria at the moment, tradies are being paid exorbitant wages which is creating a shortage of trades on building sites. Plus there are still tradies leaving to go up north. Bricklayers are hard to find, the cost of concrete has gone up again.

"The cost to build these houses (agreed to under the NHA) is going to be exorbitant.

"When you look at the last five years, land prices have more than doubled.  Over the past twelve months, construction costs have gone up 30 per cent, interest rates are up 4 per cent, which in many cases has doubled people's repayments and reduced their buying power by $250,000.

"The cost to build a new house is expensive and fraught with danger which is why the residential established market is so strong and why at the moment there is no value in buying new. It is too expensive. Something has got to give and the only thing that can give is the land component."

Mr Nicolls hopes the State Government goes through with its hinted reform to strip local councils of planning powers.

Part of the National Cabinet discussions centre on a National Planning Reform Blueprint focused on planning, zoning, land release and other measures to improve housing supply and affordability. The plan includes updating state, regional, and local strategic plans to reflect housing supply targets and streamlining approval pathways.

"The time has come to take all planning matters off councils," said Mr Nicolls.

He hopes the NHA targets will be realised but fears 1.2 million new homes nationally is unrealistic in the current climate.

"Have they got the materials, have they got land, trades? No, no and no. It's not going to happen."