Australia's housing crisis is reaching a boiling point, and it's not just about rising prices. The country has been stuck in a housing supply recession for over four years, a fact that's often overlooked in the shadow of economic growth discussions. But here's where it gets controversial: while the Albanese government has made housing a centerpiece of its agenda, the results have been underwhelming at best.
In economics, a recession typically means two consecutive quarters of declining growth, adjusted for inflation. But when it comes to housing, the real issue isn't inflation—it's the stagnant growth in supply compared to soaring demand. By this measure, Australia's housing market has been in a slump since 2019. And this is the part most people miss: the federal government's own data reveals a staggering shortage of over 137,500 homes as of July 1, 2023. Worse still, this figure might be conservative, as dwelling completion estimates were overly optimistic.
Despite the government's ambitious plans, like the Housing Australia Future Fund and Social Housing Accelerator, the share of public and social housing in the overall dwelling stock continues to shrink. This is a stark contrast to the Rudd/Gillard era, where public housing construction saw a significant boost. Is the current government doing enough, or are they falling short on their promises?
There’s a glimmer of hope in the latest building approval numbers from the ABS, showing a 12% rise in September, driven by a 26% jump in non-detached house approvals. However, this volatility in approvals, coupled with weak private sector growth, paints a picture of uncertainty. Even with successive rate cuts, the housing market remains sluggish.
The takeaway? Despite the government's focus, the housing crisis persists. We're seeing anaemic growth in dwelling completions, record-high housing price increases, and a rental crisis that outlasts those in other nations. But here's the real question: Are policymakers willing to make the tough choices needed to boost productivity and housing supply, or will they continue to sidestep the issue?
The construction sector itself is undergoing a transformation, shifting from labor-intensive work to a more white-collar approach, which has driven up costs and reduced output. Yet, these challenges remain unaddressed, even as the government pushes for productivity improvements. Is this a case of policy paralysis, or are there deeper systemic issues at play?
As we look ahead to 2025, it's clear that the housing crisis is no longer just a cyclical issue—it's a result of policy decisions. The costs of improving productivity and increasing supply are high, but the alternative could be even more devastating. What do you think? Are we on the right track, or is it time for a radical rethink? Let’s start the conversation.
