The Housing Industry Association (HIA) has mocked the Albanese government’s goal to construct 240,000 homes annually over five years.
The HIA’s latest National Outlook forecasts that only 975,970 new homes will be built in the next five years.
On an annual basis, the HIA projects that only 165,510 new homes will be started this year and fewer than 200,000 homes will commence construction in 2025 and 2026.
Annual construction levels will peak at only 218,730 in 2018, more than 20,000 below Labor’s target.
“We don’t expect that we will build 240,000 homes at all in the next five years”, HIA Senior Economist Matthew King said.
“Unfortunately the constraints are too excessive at this point in time”.
King argued that government ‘big build’ infrastructure projects were outcompeting the housing industry for certain workers.
The end result will be Australians living in rental share houses and more homes becoming multigenerational, argues King.
The barriers to housing supply are immense, including:
- The circa 40% growth in construction costs since the beginning of the pandemic.
- Structurally higher interest rates.
- Thousands of homebuilders have collapsed since the beginning of the pandemic, reducing supply capacity.
- Home builders are competing with government infrastructure projects for labour and resources.
The reality is that the supply side of the housing market has been hampered, effectively shifting the supply curve to the left.
This has reduced capacity and increased the cost of construction at every price point.
The federal government needs to balance the market out by significantly reducing the rate of immigration so that demand better matches supply.
Otherwise, Australia’s housing shortage will continue to grow.
