Several economists interviewed by SBS News have warned that Australia is unable to build enough homes for its burgeoning population, which means the rental crisis will continue for several more years.
Source: Dr Shane Oliver (AMP)
Associate professor J Ho from the School of Accounting, Economics and Finance at Curtin University warned that the “effective supply of housing is unlikely to catch up within the next three years”, because “we can’t build fast enough based on lack of materials and skilled labour, which makes it more expensive to build”.
He added that “the lag for new housing supply reaching the market when we most need it has been a recurring phenomenon in Australia for decades”.
J Ho’s view is backed by Gennadi Kazakevitch from the Department of Economics at Monash University, who said that the recent surge in rental prices reflects demand exceeding supply, driven by record high net overseas migration:
“This is exactly what has been recently happening in the rental market. Due to skyrocketing prices for buyers, more people entering the housing market opt for renting rather than buying”.
“An even more important reason is increasing immigration”.
“Last year, the country received several hundred thousand newcomers on temporary and permanent visas. They almost always initially rent their first home before considering buying”.
Kazakevitch added that there “continues to be, a severe shortage of qualified labour force and materials in the construction sector”.
“As a result, the average time of construction of a residential property has increased from six-nine months to 12-18 months”, he said.
It is great to see some honesty in this debate.
As shown in the chart above, the federal government massively ramped-up Australia’s net overseas migration in 2005, which obviously increased the demand for homes.
However, housing supply respond for eight years and only did so temporarily (i.e. the high-rise boom between 2015 and 2019):
The problem Australia faces now is that population growth has surged to a record high at the same time as dwelling completions are tracking at a decade low.
To make matters worse, the forward-looking indicators suggest that construction rates will continue to fall.
Indeed, the Australian Bureau of Statistics (ABS) on Monday released data showing that loans for the purchase or construction of a new home are tracking at historically low levels:
With the supply-side stillborn, the only solution to Australia’s housing shortage is to slash demand by dramatically lowering net overseas migration.
Otherwise, the gap between housing demand and supply will widen and Australia’s rental crisis will deepen.
