Australia Building 30,000 Fewer Homes than Needed Each Year

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Thursday, October 23rd, 2014
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Despite the current boom in housing construction, new projections suggest Australia’s long-run average annual rate of new home building could be almost 30,000 dwellings short of what is needed to meet future demand.

Releasing its analysis of a range of scenarios regarding population and income growth through to 2050, the Housing Industry Association (HIA) says the nation would need a total of 186,391 new houses and apartments if, as it considers the most plausible scenario, medium growth rates of each come to pass.

Medium growth figures imply an annual construction deficit of almost 30,000 homes per year when compared to average yearly commencements of just under 157,000 over the two decades to June 2014 (ABS data).

While low population growth states such as South Australia and Tasmania are actually building more homes than their implied long-term need, the numbers imply that high growth states require a massive lift in activity. Long-term average home building rates in Western Australia, for instance, would need to lift by more than half in order to meet implied levels of demand under the above scenario in that state.

These projections are subject to considerable variability, and implied annual levels of demand for new housing vary from anywhere between as much as 248,186 to as little as 118,164 depending on whether high or low scenarios for population and real income growth are realised. Results near either extreme, however, are considered unlikely.

Still, HIA economist Geordan Murray says the medium scenario figures put the current cyclical boom in new housing construction into perspective.

“In 2013/14, the number of new homes built was about the same as the number of new homes demanded by the population during the year,” he said. “Unfortunately a match of this kind is an aberration – throughout much of the last decade there was a considerable mismatch between the level of demand for housing and the amount of new home building.”

How Each State Compares:

In order to meet demand through to the year 2050, according to the HIA’s analysis, assuming that medium range projections regarding real income and population growth are realised:

  • Even with a modest rate of expected population growth (one per cent), New South Wales would need to lift activity from historic home building rates of 40,861 new houses and apartments per annum (20 year annual averages of dwelling commencements to June 2014 – ABS figures) to 45,284 dwellings per annum
  • Strong growing Victoria would have to lift historic building rates from 42,731 per annum to 46,669 per annum
  • Stronger growing Queensland would require a massive lift in annual home-building rates from 35,862 dwellings per annum to 44,364 dwellings per annum
  • Booming Western Australia would require a bigger lift still from 21,125 new dwellings to 34,993
  • The ACT and Northern Territory would have to lift historic build rates from 2,854 and 1,497 to 3,455 and 1,962 respectively.
  • Historic building rates in the low population growth states of South Australia and Tasmania of 9,679 and 2,354 homes each year would easily meet implied forward demand of 8,531 and 1,488 new dwellings per annum respectively.
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