1. Australia is facing one of the worst housing crises on record, with a year of record population growth and falling rates of construction.
2. In the 2022-23 financial year, Australia’s population grew by 624,000, while only 174,000 dwellings were completed.
3. Dwelling approvals, new home sales, and loans for the purchase or construction of new homes have all fallen to decade lows.
4. The housing shortfall is expected to worsen in 2024, making it impossible to achieve the government’s target of building 240,000 homes a year for five consecutive years.
5. Rising construction costs, material shortages, insolvencies, and higher financing costs are contributing to the housing crisis, along with excessive immigration levels.
Analyzing the Growing Gap Between Housing Demand and Supply
Australia’s housing market is facing a significant challenge as the gap between population growth and dwelling construction continues to widen. In the 2022-23 financial year, the nation experienced a record population increase of 624,000, but only 174,000 new dwellings were completed. This disparity is projected to escalate in 2024, exacerbating the housing shortfall.
Decline in Dwelling Construction
Forward-looking indicators suggest a further slowdown in dwelling construction. Annual dwelling approvals have fallen to a decade low of 164,000 as of October, and new home sales and loans for new home construction are near decade lows. These trends indicate that the housing shortfall will continue to worsen in 2024.
Challenges in Meeting Housing Targets
The Albanese government’s target of building 240,000 homes annually for five consecutive years is increasingly seen as unattainable. High construction costs, labor shortages, insolvencies, and rising financing costs (interest rates) are significant barriers to meeting this ambitious goal.
Rising Costs and Affordability Issues
The cost of building new homes has continued to rise, albeit at a slower pace, tempering buyer demand and making construction unviable. Prices for key materials used in new home construction have soared since before the pandemic, further challenging the feasibility of new projects.
Analyst Perspectives on Housing Starts
Analysts like Jarden economist Carlos Cacho predict a slowdown in housing starts to about 155,000 in 2024, which would be the lowest since 2012. Despite the need for new housing, higher interest rates and construction costs mean many potential buyers cannot afford new housing.
The Role of Immigration Policy
The article argues that excessive immigration is a significant factor contributing to the housing shortage. Reducing net overseas migration to historical averages could alleviate the pressure on housing demand and prevent chronic shortages.
Australia’s housing market in 2024 faces a critical challenge as the shortfall in housing supply is set to worsen. The combination of high construction costs, labor shortages, and high immigration-driven demand creates a complex scenario for policymakers and industry stakeholders. Addressing these issues requires a multifaceted approach, balancing the need for new housing with sustainable population growth and economic policies.