According to the latest data from real estate consultancy CoreLogic, the Australian real estate market has seen an 8.3% annual increase in home prices following six consecutive months of rising prices. The primary driver of this price surge is clearly the lack of supply, a situation comparable to that in the UK, but with a more severe housing stock pressure in Australia.
In terms of housing supply, Australia ranks 22nd among the 33 member countries of the Organisation for Economic Co-operation and Development (OECD), indicating significant challenges in meeting housing demand. In May, Australian home prices rose by 0.8% month-over-month, equating to an increase of AUD 12,000 (approximately GBP 6,250). The prices in major cities such as Perth and Adelaide saw substantial increases in May, while Sydney’s home prices have returned to the peak levels seen in January 2022. Currently, the median house price in Sydney is just under AUD 1.16 million (around GBP 600,000).
Curtin University economics professor Rachel Ong ViforJ, in an interview with the Sydney Morning Herald, noted that the impact of new housing supply on the market is slow and limited. She stated, “New housing supply only adds a small amount to the existing housing stock at a time, so it takes a long time for new housing supply to positively impact affordability. Most of our housing consists of older homes.” She further explained that due to the limited speed of new home construction, additional measures are needed to optimize the existing housing stock to swiftly address the current housing shortage.
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Professor Ong suggested that to better utilize existing residential resources, larger incentives could be provided to “empty nesters” to downsize, thereby freeing up more housing for the market. Additionally, she mentioned the need to address the negative impact of short-term rentals (such as Airbnb) on the long-term rental market supply. She pointed out, “The rise of short-term rentals has put pressure on the long-term rental market, so policies are needed to balance the relationship between the two.”
Besides the aforementioned measures, Professor Ong also highlighted common supply-side solutions, which are particularly important in the current context. She stated, “Removing capacity constraints in the construction industry, increasing government investment in social housing for low-income families, and reforming planning processes to better support the delivery of various new building projects” are essential measures. These steps can help alleviate the housing supply shortage and promote long-term stability and sustainable development in the market.
Currently, Australia’s real estate market is exhibiting strong growth momentum, but the issue of insufficient supply remains prominent. To address this problem, in addition to increasing new housing supply, a multifaceted strategy to optimize the use of existing housing resources is required. For instance, the government can encourage more homeowners to put vacant houses on the rental market through tax incentives and subsidies. Furthermore, improving public transportation and infrastructure can attract more residents to choose suburban living, thus easing the housing pressure in city centers.
