One of the most significant housing stories in the past year has slipped under the radar of news media, with very little commentary.

The latest official data from the Australian Bureau of Statistics shows that it now costs over $500,000 to build the average house in this country. That's the cost of construction of the dwelling and doesn't include the land price.

Given that the price of residential land is also escalating to record price levels, the reality is that the typical house and land package in a capital city is beyond the reach of most young buyers.

This, in simple terms, is the essence of the housing affordability problem that has created a national crisis.

Australia needs to build more homes – a lot more than the industry is currently able to build – but the obscenely high cost of building both houses and apartments is the largest single barrier to achieving it.

The latest ABS figures tell a very sad story. They show that the nation, in 2024, fell 70,000 home approvals short of the target set to fix the housing crisis – AND that home building costs have hit a grim new record high.

Latest Australian Bureau of Statistics figures show there were 170,719 homes approved in 2024, the second worst annual figure since 2012, with experts warning government efforts to address the housing crisis so far have failed to make a difference.

And affordability is getting worse, with the average cost of building a new house in Australia surpassing $500,000 for the first time in December, according to the ABS data, made worse by new requirements for sustainable builds.

Making a bad situation considerably worse is the soaring cost of home sites.

The Housing Industry Association says that surging land values are problematic for the struggling development sector, which is already battling soaring labour and materials costs.

Extreme housing block costs have also coincided with falling prices for established houses – making the significant premium on brand new homes a hard sell for builders.

Housing Industry Association figures showed the median price of land across Greater Sydney now stands at $2,000 per square metre. That means that even a tiny 300 square metre block of land costs $600,000.

Land prices are less – but still very expensive – in Melbourne, where that small block costs $320,000, and it's similar in both Perth and Brisbane.

But that 300 square metre block is below the normal block size. In Sydney the median lot price is $710,000 compared to around $400,000 in both Melbourne and Brisbane.

Add on that typical cost for building a home – and it makes a new house on land over $900,000 in Brisbane and Melbourne – and around $1.2 million in Sydney.

Housing Industry Association economist Maurice Tapang said the dramatic extra costs of buying land and building, versus buying established homes, could squash demand for new homes. Tapang said the price of land was now the biggest constraint on new housing construction in Australia's capital cities.

PropTrack economist Paul Ryan said: "It's becoming increasingly hard to make new housing equations stack up. There's lots of choice for established homes and the prices have gotten relatively more attractive compared to new homes, and that's something we've heard a lot of from developers".

The HIA-CoreLogic Residential Land Report showed that the median price of a capital city lot increased by 9.2% in the September quarter to $408,160 compared to a year earlier.

Tapang said: "Land prices have risen three times faster than the rate of growth in the ABS Consumer Price Index (CPI) and five times faster than growth in the cost of home building materials as measured by the Producer Price Index for the September quarter 2024."

At the same time, the cost of building a house now averages $537,000 nationally, according to the ABS, following the hyperinflation of construction costs since the pandemic.

Add those two figures together – the median lot price and the average cost of building a house – and you have $945,160.

And that, in one sentence, is the affordability issue. But I haven't heard a single politician in Australia, at any level, suggest a policy to deal with this ridiculously high cost for new homes.

And it begs the question: are politicians in government around Australia even aware that the cost of a new house on land is getting scarily close to $1 million?