Personal Loans Australia :: News
SHARE

Share this news item!

Australia’s Housing Dilemma: Construction Lags as Population Booms

Australia’s Housing Dilemma: Construction Lags as Population Booms

In a recent address delivered in Hobart, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter highlighted a mounting concern in Australia's housing market: a significant shortage of homes amidst rapidly growing population numbers, largely driven by net overseas migration.

Hunter described a “perfect storm” facing the housing construction sector, one that has set the stage for an extended phase of rising home prices and escalating rental costs. She pointed out that Australia's pace of population growth generally surpasses that of many other advanced economies, thus intensifying the need for housing.

"The growing population strengthens the underlying demand for housing over time. Every individual added to the population needs a residence," Hunter explained.

Currently, housing demand vastly outstrips supply with the estimated necessity ranging between 260,000 to 320,000 homes per year. This figure starkly contrasts with the National Housing Supply and Affordability Council’s (NHSAC) recent report, which projects an underlying demand of about 230,000 homes, later dipping to around 174,000.

The imbalance Hunter referenced has pressured rental markets substantially, leading to lower vacancy rates and inflated rental costs. She added, “[...] the last few years have witnessed unprecedented constraints in construction activities. The shortage of materials, fittings, labor, and shipping disruptions extended build timelines significantly.”

Current dwelling approvals per capita are now at a decade-low due to high costs of building materials and stagnation in new housing projects. Hunter elucidated that many participants either delayed or scrapped their projects over concerns about their projects’ financial returns given existing costs.

Housing construction expenses have sharply increased by nearly 40% since late 2019, driven by pandemic-induced supply chain challenges and fierce competition for construction resources across various sectors.

The rising cost of debt only exacerbates the situation. Greater interest expenses on loans used to finance construction projects slow down the pace at which new houses are completed, prolonging the housing supply shortage.

Consequently, the RBA projects a sustained period of low housing construction, continuing Australia's housing crisis. Hunter indicated that demand pressures will continue to drive rents and home prices upward until there’s a notable surge in new housing supply. However, the outlook appears dim as current new dwelling approvals and viability concerns suggest a slow and delayed response.

One glaring critique is the continued overlooking of an immediate, less costly solution: moderating net overseas migration to levels within the country’s infrastructure and housing capabilities.

The latest projections from the Intergenerational Report paint a daunting picture. By 2062-63, Australia’s population is expected to skyrocket to 40.5 million, a rise of 13.5 million people equating to adding three cities the size of Sydney, Melbourne, and Brisbane in just under four decades.

Without addressing migration rates, Australia's efforts to counter the housing supply shortfall may never catch up with population growth. Resetting migration to historical annual levels of around 120,000 could be a crucial step in rebalancing this dynamic.

Published:Friday, 17th May 2024
Source: Paige Estritori

Share this news item:

Finance News

RBA Holds Steady: Navigating Economic Uncertainty RBA Holds Steady: Navigating Economic Uncertainty
19 Jun 2024: Paige Estritori

The Reserve Bank of Australia (RBA) has opted to maintain the official cash rate at 4.35% for the fourth consecutive time this year, a decision that comes amidst a complex balancing act to manage inflation’s differential impacts on various demographics. - read more
Commonwealth Bank Adjusts Rate Cut Timeline Amidst Labor Market Trends Commonwealth Bank Adjusts Rate Cut Timeline Amidst Labor Market Trends
15 Jun 2024: Paige Estritori

As financial experts eagerly await the Reserve Bank of Australia's (RBA) upcoming board meeting, the Commonwealth Bank (CBA) has shifted its forecast regarding the advent of the next rate cut. Contrary to popular anticipation, the bank now predicts the rate cut will be delayed, posing less optimistic news for mortgage holders seeking financial reprieve. - read more
Economy's Chill: Aussie Consumers Tighten Purse Strings Further Economy's Chill: Aussie Consumers Tighten Purse Strings Further
09 Jun 2024: Paige Estritori

The economic climate in Australia seems to be cooling down even further as new data reveals that consumer spending continues to contract sharply. This downturn indicates a deeper recession gripping Aussie households. - read more


Personal Loans Articles

Proven Strategies to Boost Your Personal Loan Approval Odds Proven Strategies to Boost Your Personal Loan Approval Odds
Embarking on the journey to secure a personal loan can often seem like navigating through a complex financial landscape. Particularly for Australians, where the market is bustling with a multitude of lenders each with their respective criteria and rates, increasing the chances of loan approval is a pursuit that requires insight and preparation. - read more
Personal Loan Pitfalls: How to Avoid Common Mistakes in Loan Comparisons Personal Loan Pitfalls: How to Avoid Common Mistakes in Loan Comparisons
When considering personal finance in Australia, personal loans are a handy resource for achieving various financial goals, from consolidating debt to funding a major purchase. Yet, it's essential to approach this financial tool with caution and understanding. Proper comparison of personal loans can be the difference between a financial stepping stone and a stumbling block. - read more
Mastering Money Management: The Essentials of Personal Budgeting Mastering Money Management: The Essentials of Personal Budgeting
Embarking on a journey towards financial stability begins with the mastery of personal budgeting. It's the cornerstone of sound money management, where every dollar is allocated purposefully, paving the way for a future free from the shackles of financial stress. In this all-important first step, individuals learn the fine art of balancing their earnings with their expenditures, a fundamental skill for anyone looking to navigate their finances with confidence. - read more
Proven Strategies to Boost Your Personal Loan Approval Odds Proven Strategies to Boost Your Personal Loan Approval Odds
Embarking on the journey to secure a personal loan can often seem like navigating through a complex financial landscape. Particularly for Australians, where the market is bustling with a multitude of lenders each with their respective criteria and rates, increasing the chances of loan approval is a pursuit that requires insight and preparation. - read more
Your Financial Comeback: Rebuilding Credit Scores for Future Opportunities Your Financial Comeback: Rebuilding Credit Scores for Future Opportunities
In the dynamic landscape of Australian finance, the emphasis on a robust credit score cannot be overstated. A favourable credit score serves as a gatekeeper to a world of financial opportunities, determining the ease with which individuals can access loans, the interest rates they will be eligible for, and even the prospects of securing a home in an ever-competitive market. As the average mortgage sizes surge to unparalleled heights, the significance of maintaining an advantageous credit profile escalates in tandem. - read more
Personal Loan Pitfalls: How to Avoid Common Mistakes in Loan Comparisons Personal Loan Pitfalls: How to Avoid Common Mistakes in Loan Comparisons
When considering personal finance in Australia, personal loans are a handy resource for achieving various financial goals, from consolidating debt to funding a major purchase. Yet, it's essential to approach this financial tool with caution and understanding. Proper comparison of personal loans can be the difference between a financial stepping stone and a stumbling block. - read more


Need Help Finding a Loan?
Find out now if you qualify and compare rates, offers and options from multiple lenders - without a credit check!
Loan Amount:
Postcode:
All finance quotes are provided free (via our secure server) and without obligation. We respect your privacy.

Knowledgebase
Personal Loan:
A personal loan is a loan provided to an individual or individuals (as opposed to a business) and that can be generally be used for a variety of purposes subject to the approval of the lender.