Australians could be waiting a while of we’re going to build our way out of this. (Source: Getty)
There is one issue that is perennially at the centre of political debate in Australia. I barely have to even say it, but I will. Housing.
Whether one takes their data from private providers such as AMP or a public source such as the National Housing Supply and Affordability Council (NHSAC), it’s no secret that Australia has a troubling shortage of homes.
According to the NHSAC, the nation’s housing shortage worsened by 47,000 homes during the recently ended 2024-25 financial year. Based on their estimates, from July 2023 to the end of September 2025, the demand for housing expanded by approximately 137,500 homes more than aggregate net supply growth across the same period.
(Source: ABS)
The housing shortage calculations of AMP Chief Economist Shane Oliver take a longer view, beginning all the way back in the year 2000.
“Our assessment is that the accumulated housing shortfall (the green line in the next chart) is around 200,000 dwellings at least and possibly 300,000 depending on what is assumed in terms of the number of people per household,” the prominent economist wrote in a recent note.
(Source: AMP)
What Oliver is referring to by the change in the number of people per household, is the impact of changing household demographics. One of the most notable trends is the rise of the single person households, with more than 1 in 4 occupied homes now holding just a single occupant.
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(Source: ABS)
This leaves the Australian people with one very big question:
In order to quantify this, three scenarios will be explored each with a different set of conditions, such as migration, underlying domestic housing demand and levels of dwelling completions.
According to estimates from HIA (Housing Industry Association) Chief Economist Tim Reardon, under normal economic conditions the housing needs of the domestic populace add demand for 100,000 to 120,000 dwelling completions per year, before migration is factored into the equation.
With NHSAC forecasting that housing demand will continue to outstrip supply until at least mid-2029, this scenario will adjust settings in pursuit of resolving the housing shortage by 2030.
In order to achieve this, we will be making some optimistic assumptions.
Shortage – 200,000 homes
Underlying domestic demand – 100,000 homes per year
Dwelling completions – 220,000 homes per year
Net Migration – 140,625 people per year
With 100,000 homes per year being consumed solely by domestic demand, that leaves 120,000 to address the shortage and provide shelter to new migrants.
Assuming that somehow these settings were imposed on January 1st next year, we would need 57,500 completions per year to be put toward addressing the housing shortage after taking into account the impact of knockdown rebuilds and redevelopments, and the inevitable empty homes.
That leaves 62,500 homes per year for the nation’s new arrivals, which equates to a viable migration level of a bit under 141,000 per year, significantly less than the last reported figure of 315,900.
Shortage – 250,000 homes
Underlying domestic demand – 110,000 homes per year
Dwelling completions – 200,000 homes per year
Net Migration – 180,000 people per year
Under this scenario, the settings would deliver a surplus of just over 10,000 homes per year. Assuming that somehow these settings remained in place far into the future, the housing shortage would be resolved in 2051.
Shortage – 300,000 homes
Underlying domestic demand – 120,000 homes per year
Dwelling completions – 180,000 homes per year
Net Migration – 235,000 people per year
This scenario reflects the current rate of dwelling completions most accurately, with 179,400 over the last 12 months, compared with 180,000 assumed as the average annual rate going forward.
If this scenario was to be realised, which represents the higher estimates on both the size of the shortage and underlying housing demand, it would represent an annual deficit of 44,400 homes.
According to NHSAC, there is only one state that is expected to get even close to its required home building target under the Albanese government’s 1.2 million new home goal, and that’s Victoria.
During the housing accord period which ranges from July 2024 to June 2029, the southern state is forecast to complete 300,000 new homes, 98 per cent of what is required.
Its next closest rival is WA which is expected to complete 81 per cent of what is required, followed by Queensland with 79 per cent and the ACT with 78 per cent.
(Source: National Housing Supply and Affordability Council)
The nation’s relative shortage of homes also has implications for rents, and by extension, interest rates.
According to an analysis from the Reserve Bank, quarterly growth in asking rents has been reaccelerating since bottoming in the December quarter of last year.
(Source: ABS, Cotality, RBA)
With the latest data from the ABS showing resurgent inflationary pressures, as well as similar reports coming from the Melbourne Institute’s inflation gauge, a re-acceleration in rental price growth could place the size and scope for further interest rate cuts from the RBA in question.
Based on the housing shortage estimates from AMP and the underlying housing demand figures from researchers at HIA, there is no scenario in which the housing shortage is resolved this decade without major changes to the underlying settings.
It is worth noting that HIA’s estimates for underlying domestic housing demand are based on normal economic conditions, if conditions were to deteriorate we could see growth in annual demand fall, but that scenario would naturally come with its own issues.
We have explored one possible option which is a dramatic surge in home completions to an average of 220,000 per year over the remainder of the decade, a level few experts believe is currently possible.
Yet when coupled with the low-end estimates for underlying housing demand from HIA and the low-end shortage estimate from AMP, the level of viable migration is less than half what was seen in the last 12 months of data from the ABS (141,000 vs 316,000).
Ultimately, some challenging choices will need to be made by policymakers if the housing shortage is to be resolved within this decade.
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