Research shows construction cost increases, labor shortages to impact housing markets in Australia for next two years
Professor Steven Rowley (pictured above), the lead author of new Australian Housing and Urban Research Institute (AHURI) research, warns that Australia will continue to grapple with the impact of COVID-19 on its housing markets due to rising construction costs and reduced risk appetite hindering new housing supply.
The study, titled "The new normal: changed patterns of dwelling demand and supply," conducted by Curtin University and Monash University for AHURI, examines the effects of the pandemic on housing supply and demand in Australia.
The research highlights a shift in housing preferences brought about by the pandemic. Increased demand for spacious homes, both inside and outside, driven by remote work opportunities and a desire for lifestyle locations, has resulted in diminished growth in inner urban areas.
Regional towns and cities, offering sea and tree changes, have experienced growth, along with traditional first-home buyer areas on the urban periphery.
However, Rowley said that the market is reverting to pre-pandemic patterns, driven by location and affordability, despite some permanent changes such as remote work opportunities and regional house price surges.
Interest rate hikes have played a significant role in this shift, raising the cost of homeownership. Tight rental markets further restrict housing mobility.
The research highlights concerns surrounding the new housing supply. Escalating construction costs and material shortages have severely impacted the multi-residential sector. Private-sector developments are no longer profitable, discouraging builders from undertaking residential projects.
This trend contributes to a housing supply shortage and exerts upward pressure on prices and rents, presenting challenges for prospective buyers and renters.
To address these issues, Rowley emphasized the need for government-private sector collaboration in delivering diverse housing options, particularly in regional areas where the private sector faces difficulties.
“Governments should take a more direct role in housing supply, including through large-scale delivery of social and affordable housing, both in cities and in regional areas. Protecting supply chains and training a workforce to respond to supply pressures is also essential," he said.
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