AMP chief economist Shane Oliver posted the following chart on Twitter (X) showing that Australia’s cumulative undersupply of housing is about to surpass 200,000 dwellings:
“Underlying demographic demand (driven by strong population growth) continues to run well ahead of new housing supply (constrained by capacity and cost issues, etc), and is pushing the accumulated housing shortfall back up towards levels last seen prior to the unit building boom last decade”, Oliver explained on Twitter (X).
You will notice from the above chart that Australia’s housing supply was balanced until the mid-2000s, after which the market went into undersupply.
This undersupply corresponds with the ramp-up in immigration-driven population growth from the mid-2000s, which overwhelmed the rate of construction of new homes:
Looking ahead, Australia’s housing undersupply is certain to worsen.
First, dwelling approvals rates have collapsed, signalling that fewer homes will be built over the next few years:
Second, Australia’s population continues to grow at an historically high rate courtesy of strong net overseas migration:
Australia’s housing shortage will not be resolved unless the rate of immigration is reduced to a level that is well below the nation’s capacity to build homes and infrastructure.
The federal government should aim for a rate of net overseas migration of around 120,000 people a year.
Such a level is in line with the pre-2005 norm, when population demand was broadly in line with the rate of housing construction.
