Oxford Economics has released its Residential Property Prospects report, which forecasts a growing gap between the number of dwellings being built and the number needed to house Australians.
Oxford forecasts there will be a “stock deficiency’’ of 97,284 dwellings in 2024 – a number that will grow to 145,470 by 2026.
Oxford Economics Australia senior economist and report author, Maree Kilroy, said this shortfall would underpin prices for houses and units nationally, as well as keep upward pressure on rents.
Australia’s median home price hit an estimated record high of $939,000 in December 2023, and Oxford projects further growth of 2.7% in the 2023-24 financial year, before picking up steam to average 6.3% growth each financial year in 2024-25 and 2025-26 as rate cuts take effect.
The lift in prices nationally will be driven by strong growth across Perth, Brisbane, and Adelaide, whereas prices will be subdued in Melbourne and Sydney.
Record net overseas migration and falling dwelling construction caused the rental market to tighten in 2023, with the national capital city vacancy rate remaining at an extreme low of 1% and total dwelling rents soaring.
Source: CoreLogic
Oxford Economics slower but still robust rental inflation, with houses and units expected to rise by 4.1% and 5.8%, respectively in 2024.
The worsening “stock deficiency” projected by Oxford Economics makes sense in light of the latest dwelling construction data from the Australian Bureau of Statistics (ABS), which is headed in the wrong direction.
As shown in the next chart, dwelling approvals, commencements, and completions are tracking around decade lows at the same time as Australia’s population is growing at a record pace:
The number of loans for the purchase or construction of a new home is also tracking near record lows:
So long as the Albanese government maintains the throttle on immigration, Australia’s housing shortage will continue to worsen, placing upward pressure on both house prices and rents.
The housing equation is that simple.
