The Australian real estate market has been doing very well. According to some this is due to a housing shortage in Australia. But in reality, there is no housing shortage in Australia. Yes, in the places where most people really would like to live, demand often exceeds supply. But that is true all over the world.
Reports about housing shortages in Australia pop up all the time. Most of them are created by organizations representing developers and they are very good at spreading their message. But you don’t have to look very deep before you start to see that the shortage is mostly a myth. Outside the cities, the problem is often too much supply, rather than the opposite. Australia after all does certainly not have a shortage of land.
But what about the cities? Melbourne is going down a dangerous path. Far too many apartments have been built in the inner city and even more is being built. At the same time, far too many detached houses have been built on the outskirts of Melbourne. Despite that developers are just continuing building. The politicians love it, the building boom creates a lot of jobs.
Southbank is probably the last place in Australia that needs more high-rise buildings. Official vacancy rates are generally a little bit below ten percent, already a very high figure. This does not prevent both politicians and developers from proudly present new projects in Southbank which will add thousands of new units. When looking at the water consumption, the official vacancy rate in Melbourne, which has been slightly below 3% lately, may not give a true picture. For example, 17% of the properties in Docklands are not using any water at all, a strong indication that the properties are empty. Many other suburbs also have significantly higher number of properties not using any water at all than what the official vacancy rate indicates.
Brisbane has similar problems as Melbourne, albeit on a smaller scale. Oversupply of apartments in the inner city has been a problem for years and it looks like it will just get worse. Perth has been the star performer when it comes to capital growth but lately things have changed drastically. A slower economy has put prices and rents under pressure at the same time as more properties are being built.
The last 18 months, the Sydney market has become hot. This after ten years of very slow house price growth and relatively low building activity. But now developers have started to build on an unprecedented scale, overtaking Melbourne in number of properties being built. One reason for this is that developers from Asia have started to build in Sydney (as well in Melbourne). It looks like also Sydney will soon have an oversupply of apartment.
The Gold Coast may be the prime example of how the Australian property market will function in the future. The area has just started to recover from a huge oversupply but developers are already getting started on new projects. It looks quite clear that the Gold Coast will soon have a huge oversupply of apartments again. The same thing seems to happen in Melbourne, Brisbane, Canberra and Perth. Sydney and Darwin are not far behind.
So why all these reports about a chronic housing shortage? It looks like the answer is very simple. They are created by the housing industry who of course want to build as much as possible. Together with the report about a housing shortage are suggestions how to increase the supply. Typically all the suggestions are highly beneficial to developers.
Next time you spot an article about housing shortage in Australia, look for any facts backing up the claim. Often there are no facts what so ever or in best case something along the lines of that the population is growing so more housing is needed. The fact that many places in Australia suffer from oversupply is never mentioned.