Australia’s Housing Shortage: What You Need to Know
Australia’s housing crisis is spiralling out of control—prices are rising and the rental market is in crisis. With demand soaring and supply falling behind, waiting for a market crash might be a losing game. Find out why this crisis isn’t going away anytime soon—and the smart moves you can make now to protect your financial future.
The real estate market isn’t just about demand—supply is just as important when it comes to determining property prices. While recent interest rate cuts have fueled buyer demand, the bigger question is: Are there enough homes being built to keep up?
If you’re holding out for a market crash before buying, you might be waiting a long time. When demand continues to outstrip supply, prices are more likely to rise than fall. The ongoing Australia housing crisis means that housing affordability will likely remain a challenge for years to come.
The current state of Australia’s housing supply
Why construction is failing to keep up with demand
What the data shows about future price trends
How this affects homebuyers, investors, and renters
Let’s dive in.
Housing Supply and Demand Imbalance
When it comes to real estate, one crucial factor often gets overlooked—housing supply. It all comes down to simple economics:
High demand + low supply = Prices go up Low demand + high supply = Prices go down
So, where does the market stand today? The latest Housing Index from the Urban Development Institute of Australia (UDIA) sheds some light on the current situation. The ongoing Australia housing crisis is reflected in the latest supply and demand figures, with demand consistently outpacing new housing construction.
Demand:
The current demand index is 110, well above the long-term average of 101.
Demand peaked at 130 in 2021, but recent interest rate hikes have slowed it slightly.
Short-term demand is down 4.4% quarter-on-quarter and 3.5% year-on-year—but still remains above normal levels.
The supply index currently sits at just 94, indicating a shortage of new housing. While it briefly peaked at 110 during the HomeBuilder grant period, it has since dropped below 90 in recent years.
Although supply has increased 3.7% year-on-year, it still isn’t enough to bridge the gap. In fact, it has declined 1.7% quarter-on-quarter, showing that construction is still struggling to keep up.
Looking at the overall Housing Index, the number sits at just 91, a significant drop from the peak of 109 in 2021. Housing availability is now at one of its lowest levels in over a decade.
What does this mean for property prices?
Unless we see a significant boost in new housing construction, the ongoing supply shortage will likely keep pushing property prices higher. Buyers, investors, and renters alike will need to navigate a market where demand continues to outstrip supply—a hallmark of the Australia housing crisis.
Why Supply Can’t Keep Up
Despite ambitious targets, government housing plans are falling short, and the construction industry is struggling to keep up with demand.
1. NSW’s Housing Shortfall
New South Wales aims to build 252,000 homes over five years, but even this ambitious plan leaves a 120,000-home gap—keeping supply critically low and pushing prices higher.
Construction Industry in Crisis
The construction sector is in turmoil, with bankruptcies soaring. In 2023-24, over 3,000 firms collapsed, and in the first seven months of 2024-25, another 1,999 companies went insolvent. That’s a 26% increase from last year and a 69% rise since 2022-23, showing just how much pressure the industry is under. The Australia housing crisis is worsening as fewer builders are available to meet rising demand.
2. Building Is Slower and More Expensive Than Ever
Productivity in home construction has dropped 12%, with fewer homes being built per hour than 30 years ago, according to a Housing Construction study. Rising labor costs and delays are making it even harder to close the supply gap.
With fewer builders, rising costs, and a growing shortfall, housing supply is nowhere near what’s needed to meet demand. Rather than waiting for other people to fix this problem, you should focus on what you can control—your own financial future.
The Rental Market Still a Growing Crisis
The housing shortage isn’t just impacting homebuyers—it’s hitting renters even harder. With demand rising and supply shrinking, finding a rental is becoming increasingly difficult across the country.
Australia’s National Rental Vacancy Rate:
The latest SQM Research Residential Vacancy Rate Report, which tracks rental availability nationwide, shows the national vacancy rate has dropped from 1.6% in December 2024 to just 1% in January 2025. Available rentals have fallen 33%, from 47,336 to 31,812 properties.
Several cities are experiencing critical shortages:
Hobart: Record-low 0.3%, the lowest since 2005.
Brisbane: 0.8%, the second-lowest ever recorded.
Australia’s housing crisis is driven by low supply, increased migration, and rising construction costs. Unless more rentals hit the market, competition will remain fierce, and prices will continue to climb.
What is the Best Move for You
The data is clear—Australia’s housing crisis isn’t going away anytime soon, and the current market conditions are likely to persist. For homebuyers, prices will likely continue to rise unless housing supply dramatically increases, which doesn’t seem to be on the horizon. Investors can capitalize on high demand and low rental vacancy rates, creating strong opportunities for long-term growth. Renters will face ongoing competition for properties, with rents likely to increase further. And if you’re a new investor waiting for a market crash, it’s time to reconsider—low supply will keep prices high for the foreseeable future.
If you’re ready to get ahead in real estate, now is the time to act. Instead of waiting for the market to change, take control of your financial future by leveraging smart property investments. Identify high-growth areas with strong demand, and use equity to build your portfolio faster. Start making moves today with the help of a buyer's agent.
Whether you’re buying your first home, building a property portfolio, or investing in rental properties, having the right strategy is crucial. Don’t wait for the government to fix the issue—start making moves today. Book a FREE strategy call with Search Property to take the next step toward financial freedom.
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