Maria Irene

In a nation known for its stunning landscapes, diverse wildlife, and great climate, Australia is now grappling with a less-than-glamorous reality: an escalating real estate crisis. This saga is playing out on three intertwined fronts: a Housing supply crisis, the collapse of numerous construction companies, and skyrocketing rental prices. The situation is serious and deserving of critical analysis.

The alarm bell for the national Housing Supply crisis is blaring louder than ever. Recent data from the ANZ/Property Council Survey indicated that 48% of respondents considered housing supply as the most pressing issue for the federal government, a worrying 7 percentage point increase from the previous survey. This concern is mirrored at the state level with 49% of respondents listing housing supply as the top priority.

The heart of the issue lies not in a lack of demand for housing, but in the stumbling blocks encountered by developers. Challenges such as funding, sourcing materials, and locating labour for projects have become the villains of this narrative. The ‘baddies’ aren’t solely confined to economic constraints, though. A significant part of the blame can be placed on a longstanding antagonist: red tape around long-term planning.

According to Adelaide Timbrell, ANZ’s senior economist, even though the demand for housing remains robust, a combination of rising rates and cost pressures have put a spanner in the works of many projects. Add to this a substantial backlog in the residential sector, and you have a perfect storm where obtaining materials and labour has become an uphill battle.

Notwithstanding the above, confidence in the property sector has held steady, marginally increasing to 114 points. But the outlook on interest rates remains gloomy, with ANZ projecting a peak of 4.6% this year and no likely drop before late 2024.

An intriguing statistic pointed out by the Property Council CEO, Mike Zorbas, was that over the past 20 years, an extra 1.3 million homes could have been built if not for the complex web of zoning, planning, and building regulations. Zorbas advocates for national housing and planning improvement targets, state, territory, and local governments taking responsibility for increasing housing supply, and the passage of the Housing Australia Future Fund by the Australian government.

While the housing crisis remains unaddressed, an equally disturbing trend is unraveling in Australia’s construction industry. More than 2000 construction companies have gone into liquidation in the past two years, leaving behind trails of unfinished projects and disgruntled homebuyers. Industry giants like Porter Davis, Probuild, ABG, and A1A Homes have succumbed to adverse economic conditions such as supply-chain issues, rising interest rates, and the end of pandemic-era stimulus.

The fallout from these liquidations isn’t just limited to frustrated investors. The average Australian homebuyer, who’s deposited their hard-earned savings into the promise of a new home, finds themselves an unsecured creditor to a collapsed builder, often with little recourse.

Complementing the housing and construction industry crises is a severe rent crisis. Rental prices across Australian capital cities have shot up, burdening renters with increased housing costs. Data shows a 2.0% increase in advertised rents in the June quarter, reaching a median of $520 per week. This increase represents an 11.8% rise from the previous year.

The soaring rent prices aren’t restricted to houses alone. The cost of renting an apartment has seen large increases, with Sydney experiencing a 19.0% rise, Melbourne a 17.5% rise, and Brisbane a 15.3% rise. These alarming numbers are not expected to plateau anytime soon, with experts such as Angus Moore predicting a further surge in rent prices in the coming months.

The rent crisis is adding fuel to an already inflamed housing situation. Soaring prices in major cities are pushing Australians to consider relocation, particularly to regional areas where rents have remained more stable. However, this exodus is straining the already-limited housing availability in these regions, exacerbating the issue of supply and affordability.

What’s particularly concerning is the impact of these three crises on the broader Australian community. Beyond statistics and economics, these crises affect lives, dreams, and futures. The housing crunch could lead to an increased homelessness rate. Construction company failures may result in lost jobs and shattered dreams of homeownership. And the rental crisis is causing stress and financial hardship, pushing more Australians into a precarious living situation.

We can trace the roots of these issues back to policy shortcomings. A lack of foresight in planning and zoning laws, coupled with economic constraints, has hampered housing supply. Simultaneously, the construction industry was left exposed to systemic vulnerabilities, with inadequate safeguards to protect consumers in the event of company liquidations. And the absence of adequate regulation of the rental market has allowed for unchecked increases in rent.

So, what’s the way forward?

A comprehensive approach addressing all three crises is needed. Reform of planning and zoning laws to reduce the bureaucratic red tape that hinders housing development could be a start. The implementation of strong regulations and safety nets for the construction industry, to protect both the companies and consumers, would be another step forward. Additionally, placing necessary controls on the rental market, such as rent caps and regulations against sudden evictions, could ease the pressure on renters.

Australia is a country known for its resilience and adaptability. However, these crises call for more than just resilience; they call for structural change and decisive action from all levels of government. The future of Australian housing hangs in the balance, and the time to act is now. A solid roof over every Australian’s head should be more than just a pipedream. It should be a national priority.