Australia’s alarming housing supply crunch is here to stay

The property market in Australia is enduring significant strain due to an ongoing housing supply crisis, as per a recent study by InvestorKit. Despite the Reserve Bank of Australia’s relentless interest rate hikes, the demand for housing continues to surge, overshadowing the limited supply of available homes and upcoming developments. There’s little hope for this trend subsiding in the near future, with predictions that both capital cities and regional areas will grapple with these challenges for at least the next couple of years.

InvestorKit, a data-informed buyer’s agency, has detailed these findings in their latest whitepaper entitled ‘Australia’s Housing Supply Crunch’. Arjun Paliwal, Founder and Head of Research at InvestorKit, highlighted that current policy settings—including an outdated tax system, inefficient planning, escalating construction costs, and investor-unfriendly regulations—are exacerbating the crunch. He said, “Australia’s housing supply crunch is impacting both the sales and rental market at a time when we are seeing growing demand due to rising migration, a decline in average household size, and a population concentration in Australia’s capital cities.”

In calling for an overhaul in policy, Paliwal underscored the necessity for a multifaceted approach: “To resolve the housing supply shortage issue, Australia needs not just to build more housing supply but, more importantly, to have its population distributed more evenly, improve the efficiency of the planning system, have a fairer tax system to encourage stock mobility, increase the housing market’s friendliness to investors, and improve the diversity in housing and rental providers.” He warned, “In the short term, housing prices in markets that are facing the most severe supply crunch are expected to keep their robust growth momentum.”

The implications of the supply shortfall are widespread, with InvestorKit assigning Supply Shortage Scores (SSS) to dozens of regions across the nation. These scores, four or above, signify acute or critically low supply alongside burgeoning market pressures in light of the local housing demand.

Paliwal champions changes across three principal fronts: rental reforms to support the Build-to-Rent and social housing sectors, faster land supply and planning approvals, and an end to the detrimental investor-dissing fiscal policies. These investors, he emphasizes, are “crucial to a healthy market.”

To resolve the housing supply shortage issue, Australia needs not just to build more housing supply but, more importantly, to have its population distributed more evenly, improve the efficiency of the planning system, have a fairer tax system to encourage stock mobility, increase the housing market’s friendliness to investors, and improve the diversity in housing and rental providers. Arjun Paliwal

A spotlight on regions feeling the brunt of the crisis reveals Robina in the Gold Coast, Penrith in NSW, Brisbane Inner – North, Barossa in SA, and Bayswater – Bassendean in WA—each with a troubling Supply Shortage Score of 4.5 or higher. For example, Robina has seen a striking 15% population increase over a decade against a -45% dive in for-sale listings, starkly highlighting the disparity between demand and supply.

The research paper includes a discerning analysis of the top twenty regions most affected by the housing supply squeeze, uncovering the pressure points within the market. Paliwal concluded with a call to action, stating, “Despite rising rates, Australia’s housing crisis will not resolve until we nail the fundamentals—supply and demand. There is an immediate need for policymakers to review our current system and implement favourable reforms and housing policies. Without this, Australians will continue to feel the crunch in both regional and metro areas across the nation.”