Unraveling the Paradox: Housing Undersupply and Falling Market Values

⚡️ Highlights:

1. Australia’s housing market is often considered undersupplied, with a projected shortfall of over 100,000 dwellings by 2028.

2. Despite this perceived lack of housing, some markets, like Melbourne, are experiencing declines in home values due to an oversupply of housing. This gives buyers more choice and leverage to negotiate lower prices.

3. It’s important to distinguish between the market for purchasing housing and the need for somewhere to live. The desire to buy housing is influenced by factors like credit conditions, consumer confidence, income, savings, and tax settings. Needing somewhere to live is different from buying as an asset.

4. While Melbourne may have an oversupply in the market for purchasing housing, the demand for housing from people needing somewhere to live is strong. Population growth, low rental vacancy rates, and increasing rent values indicate increased housing demand.

5. The fundamental demand for housing may be strong, but purchasing demand is low. Changes in interest rates or other factors that make it easier to transition from renting to owning could stimulate buyer demand.

Additionally, ensuring a consistent supply of social housing is important for those who cannot or choose not to buy.

CoreLogic’s Eliza Owen Delivers Insightful Analysis on Australia’s Housing Supply Dynamics

In a recent Pulse article, Eliza Owen, Head of Research at CoreLogic, delves into the intriguing scenario of Australia’s housing market, which is widely perceived as undersupplied, yet some segments are witnessing declining values. This analysis comes against the backdrop of Housing Australia’s report, which forecasts a shortfall exceeding 100,000 dwellings by the end of 2028.

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The Dichotomy of Supply and Demand

The article addresses the apparent contradiction between the political and public discourse emphasizing a critical housing shortage and the observable depreciation in dwelling values in certain markets, such as Melbourne, where home values dipped by 0.9% in the three months leading to January. This decline coincides with an increase in total listing numbers, offering buyers more options and bargaining power.

Differentiating Market Demand from Housing Need

Owen’s analysis distinguishes between the market for purchasing housing — characterized by the volume of housing available for sale and the number of prospective buyers — and the fundamental need for housing. Factors influencing the desire to purchase include credit conditions, consumer confidence, and tax settings, which are distinct from the basic need for accommodation.

Melbourne: A Case Study

Focusing on Melbourne, CoreLogic’s data reveals that despite a decline in purchasing values due to an oversupply in 2023, the demand for housing from a living perspective remains robust. This is evidenced by significant population growth, historically low rental vacancy rates, and a notable increase in rent values by 10.7% in 2023.

Implications for the Housing Market

This analysis suggests that while purchasing demand may fluctuate due to economic policies and market conditions, the fundamental need for housing, particularly in rental markets, continues to grow. This distinction is crucial for understanding the dynamics at play in Australia’s housing market and the need for a consistent supply of social housing to meet the living needs of the population.


Eliza Owen’s exploration into the complexities of Australia’s housing supply and market values sheds light on the nuanced differences between purchasing demand and the essential need for housing. As Australia navigates its housing supply challenges, this distinction becomes increasingly important for policymakers and industry stakeholders.

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