Addressing the imbalance between housing supply and demand “will not be a quick fix” despite government initiatives to construct new dwellings, according to Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter.
In a speech to the REIA Centennial Congress on May 16, Ms. Hunter cited problems in the housing construction industry, which had faced a “perfect storm” of constrained activity these previous years.
Growth in demand for new housing slowed rapidly in 2020 before rebounding strongly to about 320,000 homes annually as the pandemic ebbed. Supply exhibited a less volatile trend in recent years.
Ms. Hunter noted that housing demand adjusts to the shortage and higher prices.
“Average household size could increase (which would reduce demand, for a given population size) and the pace of growth in construction costs could moderate,” she said.
However, it is clearly not enough as demand now far surpasses supply, impacting both the rental and established housing market. Capital cities largely bear the brunt of this situation as their rents increase relatively rapidly.
Ms. Hunter added that supply chain disruptions during the pandemic limited the construction industry’s ability to respond aptly to the increasing demand.
“While much of the supply chain disruption has been resolved, the pipeline of projects remains elevated and some capacity constraints are still binding,” Ms. Hunter said.
Ms. Hunter also noted it will take some time to see new supply come online amid project delays or cancellations due to the high building costs compared to returns.
Home Builders Call for Government Action
Meanwhile, Master Builders Australia CEO Denita Wawn stressed the need for government action beyond the housing portfolio and reducing the time it takes to build new supply while minimising construction costs.“The government’s recent industrial relations legislation ultimately make home building more expensive and blow out supporting infrastructure projects,“ Ms. Wawn said. ”The viability of the building and construction industry remains key to bringing down inflation and boosting economic growth.”
With the recent release of the 2024-25 federal budget, the shortage of skilled trades is a problem that remains unaddressed, according to Housing Industry Association (HIA) Managing Director Jocelyn Martin.
Ms. Martin commended the $11.3 billion government boost for the Homes for Australia Plan and $90.6 million investment in supporting fee-free training for apprentices, pre-apprenticeships, and skills assessment for overseas workers.
“The boost to investment in more social, affordable and community housing alongside infrastructure and skills funding boosts is another contribution to increasing the supply of homes,” Ms. Martin said.
However, the HIA demands the government to double these infrastructure funding, particularly for states and local councils to accelerate the construction of new homes.
On the other hand, the federal budget failed to include the role of property investors in providing rental housing in Australia, according to the Real Estate Buyers Agents Association of Australia (REBAA).
“For decades, property investors shouldered the burden of providing rental supply for successive governments,” REBAA President Melinda Jennison said. “However, it’s evident that this is no longer the situation. The rental crisis is the end result of this changing dynamic.”
Ms. Jennison went on to say that the Albanese government must incentivise investors to return to the housing market to solve the rental crisis, especially now that the $9.3 billion National Housing and Homelessness Agreement (NHHA) has been approved.
