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Research summary

This study investigated the key drivers of Australian housing supply responsiveness; including price, topographical constraints, climate, existing land uses and planning regulations; and considered policy development options to improve the scale and speed of new housing supply responses. The key drivers of housing supply responsiveness were modelled to determine their relative influence.

Key points

  • A 1 per cent increase in the level of real housing prices is estimated to produce a 4.7 per cent (3.9%) increase in new house (unit) supply. These house price gains translate into a very small increase in the housing stock which will do little to keep up with demand pressures. Hence, there is a need for policy reforms that promote the price responsiveness of housing supply in Australia.
  • Most of the growth in housing supply has been taking place in mid-to-high price segments, rather than low price segments. There seem to be structural impediments to the trickle-down of new housing supply. Targeted government intervention might be needed in order to ensure an adequate supply of affordable housing.
  • Job opportunities and population growth pressures are greater in urban areas than regional areas. However, meeting population growth pressures through new house supply in urban areas will be challenging. On the other hand, the supply of units appears to be stronger (all else equal) in already developed areas.
  • The impact of planning regulations on housing supply responsiveness is modest, though there is some evidence of a positive link between growth accommodating controls and housing supply growth.
  • Often the most important aspect of the planning system from a developer’s point of view is the certainty and consistency of advice provided by planning officers. Planning controls may be generally restrictive but if they are applied consistently the developer can work with them and deliver housing.
  • The development industry is extremely diverse, so policy settings will not have a uniform impact across the development industry.
Publication Details
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Publication place:
Melbourne, Australia