Building approvals lag far behind population growth, fuelling property price surge
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Australia is set for a prolonged period of surging property prices as annual building approvals are tracking at only about one quarter of the nation’s population growth, according to analysis by national buyers’ agency Your Property Your Wealth.
Data from the Australian Bureau of Statistics reveals that annual building approvals of just 176,043 for the year ending February 2024 represent a mere 26 per cent of the net national population growth of 659,800.
Your Property Your Wealth Director Daniel Walsh said, “You simply can’t have such a significant gap between demand and supply without it resulting in soaring property prices.”
He added that the latest monthly building approvals show that the situation is worsening, with high interest rates and construction costs decimating the building industry and any semblance of a balanced market. Walsh noted that the last time there was such a supply and demand imbalance between population growth and building approvals was decades ago.
Further analysis found that there is a shortfall of nearly 90,000 dwellings per annum, given the average household size in Australia is 2.5 persons.
Walsh, who is also the author of “6 Principles To Retire Younger & Richer,” said the housing crisis is set to be deep and long, with no medium-term remedy in sight. He wouldn’t be surprised if it took a decade for the equilibrium to be restored, and in the meantime, property prices are expected to continue increasing due to the lack of dwellings to house the current and future population.
The only possible way that the housing undersupply crisis could be reversed, according to Walsh, would be if interest rates start to fall because of lower inflation, stimulating and supporting the construction sector to build more dwellings.
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Walsh’s picks for the strongest price growth until that happens are the more affordable capital cities such as Perth, Brisbane, and Adelaide. He is also bullish about Melbourne, despite the current market narrative, and feels that Sydney will make a resurgence once interest rates decrease.