ABC News’ David Taylor posted the message below on Twitter (X), lamenting that Australia is only building around 165,000 dwellings a year, well below the 240,000 needed to address the housing crisis.
“Where does that leave us?”, asked Taylor.
Taylor’s concerns are justified.
Only 158,750 dwellings commenced construction in the 2023-24 financial year, 81,250 (34%) below Labor’s 240,000 annual target.
Only 166,200 dwellings were approved for construction in the year to August, 78,800 (31%) below Labor’s target.
Only 4,551 loans for newly constructed homes were issued in August, 65% below the early 2021 peak:
Finally, the number of detached houses sold fell over Q3 and is tracking near historical lows:
Labor’s 240,000 annual housing target was unattainable from the start for a number of reasons.
Australia has never built more than 223,500 homes in a single year. Even under ideal macroeconomic conditions, building 240,000 homes five years in a row was unrealistic.
Current macroeconomic conditions are far from optimal. Construction costs have increased by nearly 40% since the pandemic began.
The official cash rate (4.35%) is now much higher than it was in 2017 (1.5%), when building levels peaked. They are also unlikely to revert to the rock-bottom levels reached during last decade’s construction boom.
Homebuilders are competing for workers and materials with government ‘Big Build’ infrastructure projects.
Finally, many homebuilders have gone out of business due to increased costs and falling profitability.
Those who believe that increased “supply” will miraculously solve the housing crisis are lying to themselves, as construction rates have collapsed and build costs are structurally higher.
This brings us to David Taylor’s question, “where does that leave us?”
It means that Australia has no choice but to address housing demand via curbing immigration.
As illustrated in the following chart from the Australian Bureau of Statistics (ABS), the nation’s population growth and housing demand are directly proportional to the volume of immigration:
Source: Australian Bureau of Statistics
Therefore, if Australia is incapable of increasing housing construction to satisfy demand, then it needs to cut immigration to bring demand back into line with supply.
None of this is rocket science. Yet, most commentators, politicians, and industry groups claim that Australia’s housing crisis is a “supply issue”, when in actual fact it is an excessive immigration issue.
