Australia's housing crisis is deepening, with a significant supply shortfall driving up property prices and rents. In this article, we explore the root causes, including surging immigration, rising construction costs, and labour shortages, and discuss actionable strategies to secure your place in the market before it’s too late.
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I don't think people understand how big of an issue this supply crunch in Australia actually is.
In this article, I want to talk to you about numbers and facts and exactly what is happening because we simply don't have enough homes in Australia. That’s why we see prices going higher.
Is that going to change anytime soon?
If you are interested in my thoughts, then definitely keep reading.
Now, I came across an economist, and the analysis of the market actually intrigued me, so I dug a little deeper. This article basically summarises what my thoughts are but also summarizes very nicely the situation when it comes to supply.
As we know, everything comes down to the simple law of economics, which is supply and demand. If you have one or the other happen, that is what causes prices to go up or down.
For the better part of the last couple of years, we've been hearing in Australia, we can't build enough homes, and we don't have enough housing. If we don't have enough housing, and you still have immigration at record highs plus the population growing, you're going to have yourself a big, big problem.
Now, with interest rates so high, it also locks a lot of people out of the market because your borrowing capacity is not there, and because interest rates are high, more people are likely to rent, and that pushes rents even higher. So, it means it’s so much harder to actually go and save for a deposit to buy your first home as well.
Let's look at some numbers and stats to see how big of an issue this is.
Do we think it is a long-term problem or something that could be fixed in the next couple of years?
In a report published by Macrobusiness, it was found that:
Independent economist T. Brooker analysed the housing shortfall in Australia during the pandemic, presenting two potential scenarios:
The chart above illustrates Brooker's findings. Under the "ideal world" scenario, the housing deficit increased by 98,000 homes between June 2019 and now. In contrast, the "realistic" scenario shows a much larger shortfall, with the deficit rising by 232,000 homes over the same period.
Now, 2019 feels like it was yesterday, and there’s so much that’s happened in between that. But the reality is, it was five years ago, and a lot happens in five years.
This is why, as the market continues to go higher, one thing to keep in mind is that these good times won't continue forever.
I know I often come out here and say, "Well, prices are going to go up forever because the currency it's denominated in will continue to go down forever," and I'm 100% behind that.
However, along that journey of 30 to 40 years—depending on what your strategy and time frame look like—you’re always going to see corrections and periods of accelerated growth.
You’re also going to find yourself owning properties that just sit there in terms of value and go stagnant. They’re not going to go up or down, and that’s where it becomes a game of patience and knowing why you're doing this. So, although property prices over the longer term—when you zoom out over a 30- to 50-year period—will go up, you will have corrections. These corrections are necessary.
They get rid of some of the greed in the market.
People come in and buy homes thinking: Hey, this is easy money. It goes up; it always goes up. I'll hold it for 12 months, then flip it and sell it in the same state, or I’ll do a few renovations and flip it that way.
What we've seen in the market over the last couple of years is that it has basically gone vertically up. When that happens, the stability of the foundation isn’t there.
What you want is a market that goes up, corrects, then goes up again, corrects, and so on. That’s what you want to see in a healthy market.
Looking at Australia's housing supply versus its deficit, let’s assume a fully balanced market in June 2019.
You can see what we've discussed around the two scenarios and what that deficit actually looks like.
Based on the graph above, the report revealed that:
Now, here’s another graph that shows the accumulated shortfall of housing in Australia.
From 2016 to 2019, although this graph may appear to show an oversupply, it's actually undersupply. Everything above this number represents undersupply, and everything below represents oversupply.
For nearly 20 years, we’ve accumulated more undersupply every single year.
I know that sounds contradictory—more undersupply would imply oversupply—but the point is, we haven’t built enough homes. We've been in this situation for almost two decades, but now it's getting worse.
Both estimates come in the context of net overseas migration exceeding Labor’s initial projections by 513,000 in just 21 months.
What you can see here is that the expectation is shown in red, but the reality is much worse.
The federal budget and the intergenerational report estimate that Australia’s net overseas migration will remain consistently high at 235,000 per year forever. To put that into perspective: forever.
Now, it may not actually be forever, but for the foreseeable future, that is what they’re projecting. I would say it's likely going to be higher than that, at least in the next five-year window.
Historically, immigration figures ranging from 40,000 to 200,000 were considered normal. We saw this over a long period, but it has now become volatile. We've gone from border closures to a massive rebound in immigration.
My question is: Why is 230,000 becoming the new norm?
Why isn’t it 100,000 or closer to what normal immigration used to look like—especially when we know there isn’t enough supply in the market and not enough supply coming in?
The supply side is being hindered by structurally higher construction costs, rising interest rates, labour shortages, and builder insolvencies.
I’ve mentioned this plenty of times: the cost of building continues to rise.
I know this isn’t a popular opinion, and it might make you feel uneasy. However, it should be taken as news that prompts accountability and strategic action.
If you're sitting on the sidelines, hoping for a market crash to finally buy a property, ask yourself: What can I do right now?
I understand that many people feel they can’t do much, but if it means cutting down on holidays, dining out less, saving more aggressively, or even taking up a second or third job, now is the time to act.
If these predictions play out, the prospect of never owning a home in Australia is truly frightening.
Personally, I believe Australia is one of the best places—if not the best—to live and raise a family.
However, if you can’t own a home, and with immigration and rental demand surging while housing supply dwindles, what does that mean for you and your family? This is why creating a strategy is critical. If you’re not intentional, it’s not going to happen.
Thirty years ago, you might have accidentally stumbled into homeownership. But times are tougher now. The rich are getting richer, the poor are getting poorer, and the middle class is being squeezed out. These aren’t rules I’ve made—they’re being supported by current government policies.
Adding to the challenge, Australia’s construction sector has the highest insolvency rate of any industry.
Since 2021, company insolvencies in this sector have been steadily climbing, and they show no sign of slowing down.
Some may think: This guy is just a hungry investor running a buyer’s agency who wants everyone to buy property.
Maybe you were hesitant but took the plunge and bought a home in Australia, and now it's thriving. Or perhaps you’ve held back because of the constant back-and-forth from the media—one day saying prices are rising, the next predicting a market collapse, only to declare it’s the best time to buy the day after.
It’s a confusing time, and we need to help each other move forward to achieve our goals and keep the Australian dream alive.
Growing up in Sydney, I’ve known how deeply embedded homeownership is in our culture. We need our own home—a family home.
If you’re in a metro market where prices are higher, rent-vesting can be a great way to enter the property market.
I hope you’ve learned so much from me in this article.
I’ll catch you in the next one. Thanks, guys!
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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