Australia’s Housing Shortage: Looking Beyond the Headlines

Hi, Andrew Bell with you once again. Let me begin by wishing you and your family all the very best for the upcoming Easter break. It’s such a meaningful time for many and marks our last significant holiday for the year.

As my regular viewers know, I make it a priority to gather insights into the various factors influencing the real estate market. With the Federal Election campaign underway, we’re bound to hear a flurry of statistics—often contradictory—tossed back and forth between political parties. It’s easy to feel overwhelmed by it all. As a Board Member of the Real Estate Institute of Australia, I monitor all proposed policies closely, with the support of our economists and research team to help cut through the noise and make sense of it.

At the heart of the real estate conversation right now is the issue of supply and demand. Put simply, we’re not building enough homes to keep up with population growth. No matter how the issue is framed, this remains the core challenge.

As I’ve shared recently, our internal population growth isn’t what it once was. Birth rates are declining, and people are living longer. On top of that, household sizes have shrunk, meaning fewer people are living in each home. While these trends are difficult to reverse, the biggest pressure point is immigration.

It might seem like an easy fix to drastically reduce immigration numbers, but that would come at a high cost. Our economy depends heavily on skilled labour. We need more doctors, nurses, police officers, engineers—the list goes on. Without them, we can’t sustain economic growth or maintain the quality of life we currently enjoy. We simply don’t have the luxury of waiting decades for people to grow into these roles through the education system. Businesses across the country are crying out for skilled workers, and if we don’t fill these gaps, we risk falling behind on both a national and global scale.

Recent figures from the Australian Bureau of Statistics show that net overseas migration was 379,000 in the year to last September—down 32% from the post-COVID peak of 555,798 the year prior. Forecasts suggest a further dip to around 340,000 this year. While some may present this as a win for housing affordability, it masks the reality: we’re still not building enough homes to meet even this reduced level of growth. And without addressing that imbalance, we won’t solve the problem.

The true issue lies with housing construction. Political promises like increased First Home Buyer Grants may sound helpful, but they only drive up demand further. The real barrier is supply—particularly the cost of construction. Material costs continue to rise, and we’re facing a shortage of skilled labour. While we do need to attract talent from overseas, a deeper problem exists: government infrastructure projects are pulling skilled workers away from the housing sector by offering higher pay and more job security. In effect, government activity is competing with private sector housing construction and worsening the labour shortage.

High interest rates have also added to the problem, making construction riskier and more expensive. And the instability in the building industry—with a growing number of builders and developers entering administration—has further discouraged investment in new residential projects.

All political parties—red, blue, or green—should be focused on incentivising builders, creating more financial security, and addressing the ways government projects are diverting labour from housing construction. We need a record level of new residential builds, not the current near-historic lows.

And let’s not forget the lessons of the past. Attempts to eliminate negative gearing or increase capital gains tax only serve to reduce investor demand. This leads to fewer rental properties and makes affordable housing development even less attractive.

Unfortunately, I don’t expect to see any election promises that truly address the undersupply crisis. Instead, we’ll likely see more window-dressing policies aimed at appearing helpful to first-home buyers—while ignoring the fact that there simply aren’t enough homes to buy in the first place.

So, as the election campaign unfolds, don’t expect significant change. For those of us fortunate enough to own property, it’s been a time of strong value growth. But for the growing number who don’t, the rental crisis and the challenge of buying remain painfully real.

I’ll be back with you in a fortnight. Until then, I hope your Easter break is filled with happiness and rest.

Warm regards,
Andrew Bell

Andrew Bell, OAM
Chairman
The Ray White Surfers Paradise Group