Why Australia Can’t Build Enough Homes And What It Means For Property Prices

Prices don’t rise by magic; they rise when demand beats supply. This episode breaks down the data behind Australia’s housing shortage and why the next few years point to continued pressure on rents and property values. We examine the government’s 1.2-million-home pledge, weak approval numbers, low commencements, and a construction sector weighed down by insolvencies, all signalling structural scarcity.

We unpack five years of approvals falling short of the 240,000-per-year target, commencements tracking even lower, and rising builder collapses from 2022 to 2024 shrinking future supply. Add strong net overseas migration and smaller household sizes, and Australia is left with more buyers and renters competing for too few dwellings, especially in major metro markets.

For investors, this episode offers clear strategy. We explain why well-located metro assets should see resilient demand, how to assess risks across off-the-plan and house-and-land deals, and why finance stress-testing is crucial when build timelines slip. 

Subscribe, share with someone on the sidelines, and let us know where you’re seeing conditions tighten.

Chapters

• 0:00 Framing The Housing Shortage
• 0:42 Government Targets Versus Reality
• 2:04 Five Years Of Approvals Data
• 3:43 Approvals Compared To Commencements
• 5:34 Builder Insolvencies And Capacity
• 7:19 Migration Trends And Demand
• 9:15 Smaller Households, Bigger Need
• 10:45 Where Growth Concentrates And Next Steps
• 12:35 Investing Invitation And Closing

Transcript

SPEAKER_00: 0:00

Australia's housing shortage and how this is going to lead to property growth in 2026 and beyond. My name is Casey Taylor. I'm the host of the Tailored Property Wealth Podcast. And we are diving deep into some of the data around the housing shortage we have going on in this country and why it's going to see continued pressure on property prices and why in 12 months' time you will be paying more for the same asset. You're sitting on the fence, if you don't take action, it's actually going to cost you. And we'll show you why today and what some of those fundamentals are to be continuing to put that pressure on prices. We're going to get into it today and talk about the government targets that have been set. I've spoken about this in the past on multiple episodes, but we're touching on it again because understanding that is very important. 1.2 million homes over five years is 240,000 homes per year. We have never ever hit that amount of homes per year. So it's a very ambitious goal. It's a great goal that the government is targeting, but the reality is, unfortunately, it's probably not going to be achievable. And that's what we really need to hit. The government have allowed$3.5 billion in payments to different states, different local governments to be able to help meet these targets. We're going to now go through building approvals, what they have been over the last five years, and show you that they've never been met and how far below these targets we are. I'm going to run through the building approvals each year for the last five years. So the 2019-2020 financial year, total dwelling approvals were 174,528. In the 2020-21 year, there were 221,974. Now that is the highest over the five-year period, and it's the closest to that 240 that we got. 2021-22, we had 200,987. 2022-23, 177,936. So it dropped, let's call it 23,000. In the 23-24 financial year, 163,279. So not one of those years did we meet that target. One year we got pretty close, but it was still about 19,000 approvals off that target. Now, if we look at that total over that five-year period, it's 938,704 approvals. So it's still 250,000 homes less than the target. That's substantially lower than that target. It's a massive, massive difference. And that right there is putting pressure on prices because we don't have the supply keeping up with where we need the approvals, where we need the commencement and the buildings completed at the end of that. And we're going to go through some other data and show you why this pressure is still there and why this is so crucial for that under-supply. Now, if we compare the building approvals that I've just mentioned over the last five years to the commencements, commencements are lower than the approvals. So for the 2019-2020 year, the approvals were that 174,528. The total commencements were 172,959. The 2020-2021 financial year, 221,974 was the approvals. The actual commencements were 213,379. So there's about an 8,500 reduction in the actual commencements that year. 2021-22, the building approvals were the 200,987. And this year, commencements were actually higher, 206,128. So there could have been a lag from that year before, still lower overall on the commencements versus the approvals. 22-23, the approvals were 177,936. And the commencements 173,966. 2324, total approvals 163,279. In the actual commencements, 158,690. So overall, if we look at the approvals, total approvals 938,704 versus actual commencements of 925,122. So it's lower again for the actual commencements. Essentially, if we compare that target to the reality of what's taken place over that five years, the average over the five years for building approvals is 187,740. Massively below the target of 240 homes per year that the government has set. That is a difference per year of 52,259 homes. That is a massive amount of homes. A massive amount of shortage on what we require each year. And we're going to touch on some other things that are affecting that. And that is the construction industry in terms of liquidations and insolvencies. I've mentioned this one before, but this impacts what can actually be commenced and built because if there's less construction and less builders out there, there's less homes that can be built ultimately. And some of that has been from the interest rate environment rising. It's been some of those inflationary figures increasing across the construction market, and that's pushed some of these builders into bankruptcy, insolvencies, et cetera. 2022, there were 1,793 construction firms that entered into external administration. In 2023, there were 2,546 construction firms in insolvency. Now that's a 42% increase from 2022. One of those was a major builder, Porter Davis Homes. And they actually that stopped the progression of 1,700 homes. Imagine being one of those people. And this is why this is a topic for another episode, but these people pushing these house and land packages, that's where there is risk there. 2024, 3,217 construction firms collapsed and entered administration. That's another increase of 26% on the previous year of 2023. So massive amount of people out there that commenced construction on something and then it didn't finish. So there is massive risk there. But if if the number of builders and people in the construction space is decreasing, that's less likelihood of being able to meet these targets. Migration demand. So we've got the supply. We understand supply is under supply, but we've got the demand coming in the into the country and that demand increasing. So I'm going to go through the migration stats over the last five years, what they look like, and then the progression, and then the projection over the next couple of years. Now, we've definitely reined it back in than a couple of the previous years post-COVID, but there's still a massive amount coming into the country. So 2019, net overseas migration, 235,860. So it's obviously pre-COVID. We then entered into COVID in 2020. Net overseas migration obviously reduced a lot in that time, 1,117,000. 2021 was the same, 1,117,000 people. Now that's still a lot of people coming into the country despite reducing from 2019, essentially halving. But then what happened is 2022-23, they opened the floodgates, and that was obviously to make up for some of that shortfall over the past couple of years. We had 536,000 as a net overseas migration into the country. Obviously lower than the previous year, but still a massively solid number. So in just those last two year periods, essentially another million people in terms of net overseas migration. Now if we've got 50,000 homes under that target, and we've now got over a couple of year periods another million people coming into the country. Now migration projections over the next couple of years is really coming back to normal levels. 2025-26 is approximately 260,000 and 26-27, 225,000. So again, over a two-year period, that's still half a million people coming into the country. Now, this is a little bit of icing on the cake, and what some people don't understand as well. In the last census in 2023, it was documented that there is an average of 2.5 people per household. Now that over the last century has really declined. 1961, that reduced to 3.6 people. 2001, it was 2.6, and 2021, 2.5 people per household. So as that person per household is lower, people stretch between more homes, and that is putting pressure on the number of homes we have currently. Now the RBA has done some analyst on this, and because of that household average reducing from 2020 to 2022 in September, they estimate without any population growth that there needs to be an additional 120,000 new homes because of that reduction in the average household. So right there, we've got an increase in the requirement on houses, but we then have houses not keeping up with our targets, and then we have even more people coming into the country. If you understand this, this is understanding the simple supply and demand. We know if demand is increasing, supplies reducing, this is scarcity. This is the pressure cooker for growth, and this means prices will continue to grow in value if you look in the right locations. If you're focusing on those major metro locations where they continue to receive that population growth, there is that pressure there. There is that demand for these people coming in as skilled workers to fill jobs and those opportunities. If you understand this truly, you'll understand in five years' time, prices are going to be far higher. Property prices today are on discount to what they'll be in the future. If you want to go out there and you want to invest in property, but you want to do it right, you want to build a multi-million dollar property portfolio, you want to get closer to financial freedom. Please reach out. We can book a discovery call and see if you might be one of the limited clients we work with each month. I hope you enjoyed this episode. It is data driven. It's a great one to really unpack and understand. Hope you enjoyed, and we'll see you on the next episode.