Weekend Edition: Housing costs - it’s all a question of supply
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Why do Australian house prices keep soaring – is it just supply and demand?
Crazy house prices, unaffordable rent, insufficient public housing, and it only seems to be getting worse. So there are lots of theories about why Australian house prices are so high, but does it ultimately just get down to supply and demand? Our guest this weekend says yes, whichever way you look at it, that's the root of the problem. So let's test that theory. The morning call from NAB with Phil Dobby. The weekend edition. Last year, for the first time, the value of all residential dwellings in Australia surpassed eleven trillion dollars. That was in the September quarter last year, the latest numbers according to the ABS. The median value of an established house transfer a sale in other words of a house, not an apartment, in Sydney in that quarter was one point three six million dollars.
But that was actually down from one point four five million. million the previous quarter, but both are well up on below one million just back in December twenty twenty. Even if you take the lowest of those two latest numbers, that's still up thirty seven percent on that Q four number from twenty twenty, even with interest rates being as elevated as they have been. And over that same period, since December twenty twenty, That eleven trillion dollars for the value of all dwellings Australia wide is up fourteen percent. But some of that, of course, is because there are more dwellings, but they've only increased by four percent over this time. The mean dwelling price across the country is up over eleven percent.
But clearly it remains a bigger issue than anywhere in Sydney. That four percent growth in stock over the four years doesn't apply in Sydney. Over that. At the same time, housing has increased by only two point three percent. So is supply the real issue that is pushing prices up? Let's ask Peter Tulip, he's chief economist at the Center for Independent Studies, he was at the RBA before that and he joins us now. So supply uh it clearly is an issue, but is it the issue, Peter?
So supply and demand interact. And the problem we have in Australia is that we've got steadily increasing demand. increasing maybe say three percent a year, but supply has only been increasing by less than that, say two percent a year.
So if we saw that supply was keeping up with demand, then we wouldn't have any outsized increase in the in in the price of properties. Sure. And you see that in
many countries in a lot of other cities, um, in fact in ri many regional areas in Australia, that where the supply is responsive, then an increase in demand is reflected in increased number of dwellings. But in our big cities that doesn't happen. There's there are strict limits on supply, in large part because of planning restrictions. And so So their increases in demand are reflected in increasing
So can we point to places in Australia where that planning is less stringent? I mean obviously I mentioned some of the figures for Sydney. Sydney is a bit of a standout in all of this, isn't it? Uh in that prices have continued to rise at astronomical rates really. Uh and we know that you know the the the growth in stock has been very slow. Are there other places where we can say, well, actually there's less stringent planning and so they're not seeing this price growth?
Yeah. So Melbourne builds. at a much quicker rate than Sydney does. Um so they're year after year. Um Melbourne provides more houses than Sydney.
How does Peter Tulip explain the mismatch between housing demand and supply?
And as you would expect from that, it has lower prices. I mean it's still not good in Melbourne. I mean there's still it's still much more expensive than in other big cities in Australia, but it's clearly better than Sydney. Um, typically the zoning restrictions are less important when y the smaller the city is because there's more scope for going outwards. Where the zoning restrictions really bite is when a city has to start going up. And our zoning restrictions just
But do we need to change the zoning then? Because I mean you could say in Sydney, uh I mean there has been movement out west. I mean obviously that it's constrained by by the basin, uh but you could put more houses out west and that's that's happening.
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Chapters
8 chapters
1
Why do Australian house prices keep soaring – is it just supply and demand?
0:01–3:32
2
How does Peter Tulip explain the mismatch between housing demand and supply?
3:32–8:04
3
What role do planning restrictions and NIMBYism play in limiting new homes?
8:04–11:34
4
How do Melbourne’s building rates compare with Sydney’s and why does it matter?
11:34–15:38
5
What does the ‘zoning tax’ reveal about the true cost of Australian apartments?
15:38–19:27
6
Can easing zoning rules, like in Auckland, actually lower rents and prices?
19:27–23:13
7
Why aren’t subsidies, first‑home buyer schemes, or rental assistance solving affordability?
23:13–27:25
8
What are the biggest political and local‑government barriers to building more homes?
27:25–30:23