Australia's Housing Supply Crisis: A Delicate Balance Between Numbers and Reality

Strategic Insights -

As Australia's construction industry continues to face significant challenges, including high building costs and lengthy construction times, the country's housing supply crisis deepens. Analysis has found that over 30,000 approved homes remain unbuilt, while 219,000 homes are currently under construction, with construction times blowing out and building costs remaining high.

Key Takeaways:

  • Over 30,000 approved homes remain unbuilt, with construction times blowing out and building costs high.
  • The average number of quarters taken to complete a new unit has risen from about six a decade ago to more than nine.
  • Despite the federal government's target of delivering 1.2 million new homes over five years, the closest Australia came to meeting this target was in the five years to December 2019, when just over a million homes were completed.
  • Home ownership rates have fallen from 67.2 per cent in June 2014 to 66.2 per cent in June 2020.
  • Eliza Owen, head of research at Cotality, warned that homes were being approved and then getting stuck, leading to a focus on delivering the pipeline and improving productivity.
  • Owen suggested possible ways to reduce demand for housing, including winding back negative gearing and capital gains tax concessions for residential property, implementing broad-based land taxes, or including the family home in the pension asset test.
  • Johnathan McMenamin, head of economic forecasts at Barrenjoey, agreed that governments still needed to focus on approvals, citing a shortfall of approvals relative to government targets and a clogged supply pipeline due to high costs and sluggish house prices.
  • McMenamin backed improved zoning as a focus, noting that allowing more apartments to be built is one of the more natural ways to meet housing targets.

Statistics:

  • 30,000 approved homes remain unbuilt (Catality analysis of ABS figures)
  • 219,000 homes are under construction (Catality analysis of ABS figures)
  • Average construction time per unit: 9 quarters (Catality analysis of ABS figures)
  • Home ownership rates: 67.2% (June 2014) to 66.2% (June 2020)
  • Federal government's housing target: 1.2 million new homes over five years
  • Closest Australia came to meeting housing target: 1 million homes in five years to December 2019
  • Average number of quarters taken to complete a new unit: 6 quarters (a decade ago) to 9 quarters (currently)

Sources:

  • Catality analysis of ABS figures
  • Cotality head of research Eliza Owen
  • Barrenjoey head of economic forecasts Johnathan McMenamin
  • Australian Bureau of Statistics (ABS) figures