Why is there a housing shortage in Australia?

What has led to housing deprivation in Australia?

Australia's housing crisis has reached a tipping point, with limited supply and soaring prices. To truly understand the gravity of the situation, it’s crucial to dive into the key factors driving this crisis, the ripple effects it is creating, and the practical solutions that can help turn things around.

1. Growth in Population

➤Rapid Increase

Population growth through both natural increase and net migration continues to increase. Net migration exceeded 400,000 in 2023 alone. Due to the quality of infrastructure, job opportunities and facilities, major cities such as Sydney, Melbourne, and Brisbane have experienced strong population growth. 

2. Land Scarcity

➤Illusion of Surplus

Despite Australia's enormous land area, a considerable portion still needs to be designated for development due to protective environmental, agricultural, and geographical limits. Stringent zoning laws and lengthy approval processes further restrict urban sprawl.

➤Limited Releases and Long Approvals 

Even when land is allocated for housing, the development approvals still take a long time, worsening shortages and increasing prices.

➤Example 

Housing projects in the western suburbs of Melbourne have been on hold for years due to local councils and environmental concerns, which stop developers from building.

3. Building Challenges: Delays and Rising Prices

➤Supply chain disruptions

Global supply chain problems have drastically raised the cost of building materials. prices for steel, timber, and concrete have surged to over 20% prices rise over the last few years.

➤Labor Shortages

There are labour shortages in Australia, causing delays in construction projects and reducing the total number of houses built over a given time frame. 

4. Rising interest rates

Rising interest rates have also discouraged developers causing them to shelf projects. This has slowed housing construction. Small to medium scale developers are also struggling to obtain finance for their development projects with the banks tightening lending policies. This further tightens the pool of properties available for sale. 

The lack of supply also implies opportunity for you as an investor.

At Property Framework, we buy properties in low supply areas which have good potential to rise up in value further.