Increases in Sydney and Perth housing stock fails to meet population growth

Increases in Sydney and Perth housing stock has so far failed to match population growth according to research from the Australian Housing and Urban Research Institute (AHURI) and the Bankwest Curtin Economics Centre (BCEC).

The research, titled Housing supply responsiveness in Australia: distribution, drivers and institutional settings, found increases in Perth and Sydney’s housing stock over the past ten years have been insufficient to match the increase in their growing populations, with supply-side barriers more acute in Sydney than Perth.

Professor Rachel Ong, Deputy Director of BCEC, said while national growth in Australia’s housing stock has kept pace with population growth over the last ten years, the picture is very different for some of our major capitals.

“We’d normally expect to see a trickle-down effect, where building higher-value homes leads to the opening up of lower-value homes for those on lower incomes," she said.

"Our research indicates this isn’t the case, meaning an increase in housing supply is not leading to better housing affordability.

“This indicates that a broader policy response is needed to address the structural impediments that weaken the 'trickle down' impact on new housing supply.

"There is a real need for targeted government intervention, including measures that improve financial incentives for developers to build at the lower end of the housing market.”

The report also found most new housing is concentrated in mid-to-high price market segments and the supply of units is more likely to be concentrated in job-rich areas." 

“A likely result of that will be shorter commuting time to work, which offers an important boost to productivity,” Professor Ong said.

Key findings of the report include:

• An increase in the level of real housing prices by 1 percent produces an estimated 4.7 percent increase in new housing supply. Units with a 1 percent price increase yields a 3.9 percent increase in supply.
• Structural impediments weaken the ‘trickling down’ of new housing supply from mid-to-high price segments to lower-value segments, where affordable housing is needed for those on low incomes.
• Targeted government intervention is needed to ensure an adequate supply of affordable housing.
• The supply of units appears to be higher (all else equal) in already developed areas. Therefore, measures that further promote the construction of units could prove an effective pathway to easing price pressures and expanding affordable housing opportunities.
• The impact of planning regulations on housing supply responsiveness is modest, though there is some evidence that government planning policies that promote housing growth are leading to an increase in housing supply.
• Developers are more willing to work with restrictive policies that are implemented by planning officers with consistency, than with more lenient policies that come with conflicting consistency and advice.