NSW Treasury Models Lower Sydney Housing Costs With More Infill

Short summary

NSW Treasury modelling published on 27 August 2026 suggests that continuing to ease density constraints in established Sydney areas could reduce housing costs per square metre by about 24% over 40 years, compared with retaining 2021 density constraints.

The model also estimates commuting costs could be about one-fifth lower. Treasury expresses the combined household benefit as the equivalent of about $8,400 in additional annual income for the average Sydney household, measured in today's dollars.

These are long-run differences between modelled scenarios. They are not a forecast that an individual home will become 24% cheaper, a valuation, or a promise about a suburb, project or commute.

Use the Property Purchase Cost Calculator for an indicative transaction-cost estimate based on a price you enter. It does not use the Treasury scenario to predict a future purchase price.

What Treasury compared

The technical paper is titled Growing up or growing out. It uses an urban economics model to compare two broad paths for Sydney over the next 40 years.

The second scenario allows more infill development closer to existing jobs and services. Infill can include apartments, terraces, townhouses and other additional homes within already developed areas. It does not mean one building type is assumed for every neighbourhood.

Treasury reports the differences against a modelled baseline. The results depend on how households, developers, land prices, travel costs and housing supply respond inside the model.

The headline results

The NSW Intergenerational Report release summarises three results from continued easing of density constraints over 40 years:

The 24% figure is about housing costs per square metre, not the sale price of every dwelling. A household could choose a different dwelling size or location as the city changes. The result should not be applied as a discount to a current listing or calculator input.

The $8,400 figure is a modelled welfare equivalent. It is not a payment, tax saving, wage increase or household budget forecast.

Why location changes the model

Where new homes are built affects more than the number of dwellings.

When more people can live closer to established jobs and services, the model can produce shorter journeys and less outward expansion. When density remains constrained, more households may need to trade off dwelling size, housing cost and distance from employment.

That city-wide mechanism does not tell a buyer whether one apartment, townhouse or house is suitable. Building quality, strata costs, land value, local services, transport reliability and household needs still matter at the property level.

The Compare Suburbs tool can organise current suburb information already held by RealEstateCalc. It does not score planning reforms or forecast prices.

How this relates to the Sydney Plan

The modelling was published two weeks after the NSW Government finalised its 20-year Sydney Plan. That plan says Sydney will need at least 800,000 more homes by 2046 and requires councils to maintain long-term feasible housing capacity.

The Treasury paper looks further ahead and tests an economic scenario. It does not approve a particular development and it does not replace local planning controls, infrastructure decisions or development assessment.

For national construction context, the August Housing Accord progress update separates approvals, commencements, work under construction and completed dwellings. A planning model should not be counted as an approval or completion.

What the model does not tell a buyer

The paper cannot determine:

• the future value of a specific property;
• which suburb will add the most housing;
• whether a proposed development will be approved;
• the condition or construction quality of a dwelling;
• future mortgage rates, rents, strata levies or land tax; or
• whether a household should buy, rent or invest.

Run property-specific costs from current evidence. The Mortgage Repayment Calculator uses the balance, interest rate and term entered. The Stamp Duty Calculator estimates duty under the selected state settings. Neither treats a long-run planning scenario as a price prediction.

What remains uncertain

• The comparison runs across 40 years, so small changes in assumptions can compound.
• The published headline is a difference between scenarios, not an observed price change.
• Housing cost per square metre is not the same measure as a median sale price.
• Commute outcomes depend on where jobs, transport and households locate.
• Future governments can change planning, infrastructure and tax settings.
• Individual developments still face feasibility, finance, design and approval constraints.

Sources

• NSW Treasury: Growing up or growing out, technical paper published 27 August 2026 and checked 29 August 2026.
• NSW Government: 2026-27 NSW Intergenerational Report, published 27 August 2026 and checked 29 August 2026.
• NSW Government: 20-year Sydney Plan, published 13 August 2026 and checked 29 August 2026.

General information disclaimer

This article provides general information about a government economic model. It is not financial, property, planning, legal or investment advice. The results are scenarios, not property forecasts, valuations, approvals or guarantees. Check current planning instruments and obtain property-specific professional advice where appropriate.

Last updated: 29 August 2026.