Housing our population

HIA’s report Housing Australia’s Future finds that a high level of housing supply is required to meet demand and arrest Australia’s housing affordability crisis.

Photo courtesy HELM


Tim Reardon

The past 15 years for Australia’s housing market have been dominated by a persistent imbalance between the rapid growth in the population and the slow rate at which new housing stock has come online. This imbalance between the slow supply of housing and the ongoing strong demand for this basic human need, has been the underlying cause of rapid acceleration in prices and ultimately Australia’s housing affordability crisis.

In more recent years, state governments have been making some progress in response to the crisis by facilitating growth in new housing supply through increasing the availability of land for housing, and by facilitating the construction of higher density dwellings in metropolitan areas.

These measures, combined with favourable interest rate settings, culminated in a record number of 233,544 new dwelling commencements in 2016. This level of building exceeds the previous record set in 1994 by 25 per cent. It is also 37 per cent higher than the average annual build so far this century.

Critically, for the first time since 2003, the number of homes built in Australia has come close to fulfilling the needs of Australia’s growing population.

Against these significant shifts in Australia’s housing environment – which are highlighted by 2016 Census data – HIA has updated its flagship analysis of Australia’s housing demand and supply, Housing Australia’s Future. Specifically, the report considers future economic and demographic scenarios and the corresponding level of housing demand the industry will need to satisfy.

From this analysis we conclude that if the population continues to grow at the current rate and economic growth remains modest at around current rates, Australia will need to increase the number of homes it builds each year by 20 per cent from this year up to 2050. This amount will be required to avoid worsening the existing affordability challenge that the community already faces.

A third of Australian households are now living in an apartment, compared with five per cent 25 years ago

Achieving this goal is a challenge in its own right. The challenge would be magnified if Australia’s household income growth returned to a rate above its long-term average because this outcome would generate further housing demand. If this does occur, then Australia will need to build in excess of 250,000 homes each year on average simply to ensure that the current affordability challenge is not amplified.

By way of comparison, Australia built just 175,000 dwellings per year on average over the 17 years since 2000.

A summary of the new home construction levels required up to 2050 is provided below. Details regarding the research and analysis underpinning these projections are provided in the Housing Australia’s Future report.

This shift upwards in the number of new homes required has not, and cannot, be met solely with the construction of the traditional detached house.

Census 2016 results demonstrate that apartments and semi-detached dwellings are housing a larger proportion of Australian households. This trend has partly been driven by households acting on a preference to enjoy inner-city living, which is most accessible through apartment dwellings, and the affordability of apartment living. A third of Australian households are now living in an apartment, compared with five per cent 25 years ago.

Addressing the affordability crisis is not a task that can be completed in a few years, or by amending single policies such as negative gearing and capital gains tax, placing punitive charges on foreign investors or focusing on short-term development strategies.

A meaningful response to the affordability crisis must see the needs of the housing industry as a key focus of government policy – at each of the three levels of government. Improvements in the delivery of residential land and accelerated approvals processes for new homes are required.

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