Developer lobbyists, the Urban Development Institute of Australia (UDIA), and building materials supplier Brickworks have rubbished the Albanese government’s target of building 1.2 million homes over five years.
The UDIA forecast that housing construction will fall 393,000 dwellings short of the target for the combined capital cities alone by 2029, amid high construction costs and labour shortages.
The UDIA analysis suggests the production rate for both greenfield homes and apartments has fallen significantly below average. It predicts an 11% drop in new dwelling production in 2025, a slowdown that would eventually put upward pressure on overall housing costs.
“A key insight from this year’s research is that while there are some positive signs of improved supply activity in the national greenfield market, the apartment and multi-unit sector remains mired in a near record low level of output, which is weighing heavily on aggregate dwelling production”, said Col Dutton, UDIA national president.
“Housing supply shortages are set to continue due to elevated (and still growing) material input costs, labour shortages, combined with high inflation leading to cost of living pressures and interest rate rises”.
Barrenjoey chief economist Jo Masters agreed with the UDIA’s forecast.
“This was always an ambitious target given that the sector has never delivered at that pace, and is currently facing elevated costs, difficulty hiring suitable labour, and material friction from planning and regulation”, Masters told The AFR.
Chief executive of Brickworks, Mark Ellenor, which operates the Austral Bricks and Bristile roofing and tiles businesses, warned that the government’s target is “not going to go close to being met”.
Ellenor anticipated that home-building activity would stay low for the rest of the year, blaming the delay on a backlog in services to provide water and sewerage connections to new developments.
He claimed apartment-building activity was significantly slower than detached dwellings, with multi-residential approvals at their lowest level since 2012.
With the supply side bottlenecked, there is only one viable solution to Australia’s housing shortage: immigration must be cut.
Canada implemented sweeping immigration cuts, aiming for just 0.3% population growth over three years.
The policy has already born fruit, with population growth falling back into line with construction capacity.
“For the second quarter in a row, population increase per construction unit has returned to its 1981-2019 historical average of 2”, noted Bank of Canada economists.
“This is a step in the right direction, but it is not enough to correct the imbalance caused by the slippage of the past three years”.
“In order to reduce the housing shortage and significantly improve housing affordability, population growth will have to be below the usual ratio for some time”.
“Further slowing population growth will be necessary to help mitigate the housing shortage”, the economists said.
