It’s abundantly clear that no government in Australia has a clue how to deal with the rental shortage crisis.
Politicians don’t understand it and they certainly can’t comprehend the reality that they created it, or want to admit that they did, so they have no idea how to solve this very big problem.
All we have from some of the nation’s governments is a vague notion that we need to be building more homes.
That, actually, is not the core issue for the rental shortage, but that’s the attitude of some politicians, including those in the Federal Government.
The Federal Government announced last year that it would build 1.2 million new homes in the next five years.
What they mean by that is: they would like the building industry to somehow produce 1.2 million new homes.
For the Federal Government this was a press conference opportunity, a public display of doing something, with no actual policies in place to make it happen.
Because the brutal reality is that there is no chance that this “promise” will be delivered – and it will go onto the already big list of promises that this Government has broken.
Here’s the reality. Australia has never, in its history, build that number of homes in any five-year period – not even close.
And there’s no chance of achieving it now, with the building industry crippled by multiple issues, including builders going broke every week, shortages of materials and tradespeople, and ongoing cost escalations.
The building industry is also hampered by restrictive policies and red tape by state governments and at local council level.
State Governments consistently pass new regulations which add massively to cost of creating new homes in Australia. This means that, even if the industry could produce 1.2 million new homes in five years – and it can’t – they would be very expensive new homes.
The latest official figures on building approvals show how far behind the nation is, in terms of this fantasy target perpetrated by the Federal Government.
The latest data from the Australian Bureau of Statistics shows that the number of dwellings approved in 2023 was the lowest annual level since 2012.
Last year there were 162,000 new homes approved for construction.
Keep in mind that, to meet the 1.2 million target, Australia needs 240,000 new homes to be built each year. At the current rate, we’re 80,000 homes short in the latest year.
Prior to the Covid-19 pandemic, dwelling approvals on a 12-month rolling average were about 177,000 per year, also well short of the rate of production that the Government says it wants.
NAB’s head of market economics Tapas Strickland says: “Unfortunately, a supply fix is not coming in a hurry.”
Strickland says the current, very subdued, annual rate of dwelling approvals is in sharp contrast with the very strong population growth in Australia over the past year that had put pressure on rents and dwelling prices.
Australia’s population aged over 15 has increased by 664,000 in the past year, taking the population per dwelling approval ratio to 4, its highest level in history, and well above its long-run average of just 1.5.
In Queensland, 34,000 new dwellings were approved for construction last year but that number pales in comparison to the 116,000 people who made the move to the Sunshine State. It’s about 14,000 short of Queensland’s annual target for its share of the Federal Government’s target.
And if you want an outstanding example of politicians making empty promises they have no intention of keeping in this sphere of activity, what about the new Premier of Queensland, Steven Miles, who has promised to deliver a million new Queensland homes – by the year 2046!
Let’s be honest – Steven Miles is unlikely to survive the next state election in October this year, let alone still be in power 22 years from now to deliver on this ridiculous undertaking.
Leaving the fantasy world and returning to reality …
Commonwealth Bank economist Stephen Wu says a combination of higher interest rates, elevated building costs and constraints in the construction industry has acted as a disincentive for developers to invest in major new projects – like high-rise apartment developments.
He says that the more significant planning process involved in larger projects also means that multi-unit dwelling activity takes longer to respond to stimulatory policies such as the reduction in interest rates that is expected later in the year.
Stephen Wu expects home building approvals to pick up in 2024, but only marginally.
HIA Managing Director Jocelyn Martin agrees that the Federal Government’s target of 1.2 million homes will fall well short, particularly if Australia’s chronic shortage of skilled trades people is not dealt with soon.
Martin says: “HIA has called on the Government to implement a multi-pronged approach to bring many more skilled tradespeople and other key workers into the industry.
“HIA recognises the challenges brought about by the lack of skills won’t be fixed overnight but there are some measures that the Government could take to help ease the labour shortage.
“We are calling on the Federal Government to instigate a widespread education program to better promote the substantive career opportunities that exist in the building industry.”
It’s also asking for incentives for apprenticeships.
Master Builders Queensland chief executive Paul Bidwell says the home building industry was under “immense pressure” and warned that more businesses would “go to the wall” without government support.
Bidwell says: “It’s always disheartening to hear that any business has been forced to close its doors – and unfortunately, it’s something that is happening more often as the challenges for the building and construction industry have continued to mount in the wake of the pandemic.
HIA Senior Economist Tom Devitt says there were only 51,570 loans issued in 2023 for the construction or purchase of a new home, less than half the number of loans issued just two years earlier in 2021.
Devitt says: “The ABS has been collecting data on lending for new homes since 2002, and today’s data shows the lowest number of these loans being issued on record.
“The steepest RBA rate hiking cycle in a generation has compounded the elevated costs of home building, seeing potential home buyers squeezed out of the market and fewer new homes commencing construction.
“This lack of new work means the pipeline of new housing supply approaching completion is now shrinking rapidly.”
And finally, Devitt says: “At this rate, Australia will not commence enough housing to meet National Cabinet’s target, falling well short of the 1.2 million new homes they want to see built in the next five years.”
What does all this mean?
It means that the shortage will continue for many years to come and that prices and rents will continue to rise.
It’s a chronic situation caused by governments and the politicians have presented no solutions, other than a desire that the building industry somehow will miraculously create more homes than ever before – without any assistance from governments to make it happen.
