Australia is facing a severe housing shortage as demand reaches unprecedented levels, according to new data from the Urban Development Institute of Australia (UDIA).
The UDIA’s latest Housing Index for the June quarter reveals that both homes for sale and rent remain in short supply, pushing prices higher and making it increasingly difficult for first-home buyers to enter the market.
The report assesses the Australian new-build housing market, highlighting key trends in demand, supply, and construction costs for residential properties across the country.
“According to the UDIA Housing Index (UHI), demand for housing has surged across Australia, reaching record highs in the past three months. Meanwhile, housing supply is at its lowest in nearly a decade, with all states reporting stagnant or minimal growth,” said UDIA National President Col Dutton.
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The low rate of building approvals has aggravated the shortage, with insufficient new homes to meet the surging demand. The UHI Supply Sub-Index for June shows that national housing market activity remains critically low, with the index sitting at 88 points—12% below the long-term average and 21% below its peak.
“The housing market supply has failed to keep pace with the overwhelming demand. Building activity is at its lowest in a decade, deepening the housing crisis,” said Eleanor Creagh, Senior Economist at PropTrack.
“This supply-demand imbalance is counteracting the effects of high interest rates and deteriorating affordability, further driving price increases.”
The UHI also highlights that rising construction costs are compounding the housing supply crisis. Softening rates of building approvals and new home starts are contributing to the low supply levels.
“High interest rates and increasing construction costs continue to stifle new home builds, with no significant reduction in costs on the horizon,” said Cameron Kusher, Director of Economic Research at PropTrack.
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Although inflation in construction materials has slowed, rising construction costs persist, putting further strain on project viability. As a result, no immediate recovery in housing supply is expected in the coming months.
Demand, on the other hand, has climbed sharply, driven by increased owner-occupier mortgage lending and record population growth. The UHI Demand Sub-Index for June surged by 6.7% to 127 points—the highest in nearly a decade and 26% above the long-term average.
“The UDIA Housing Index makes it clear that Australia’s housing market faces significant challenges. To meet the growing demand, governments need to collaborate with the residential development sector to unlock housing supply and increase capacity,” Mr. Dutton concluded.
