This inquiry will develop coherent conceptual frameworks and empirical evidence to guide housing policy reforms that promote Australia’s economic development

  • Project dates: 2015

This report addresses the following research question: What are the key drivers of housing supply responsiveness, and what do the identified effects imply for policies seeking to increase housing supply responsiveness in Australia?

In order to address this research question, this report will:

  •  Shed light on the links between the price responsiveness of housing supply and productivity in Australian metropolitan and regional economies.
  • Investigate whether the supply of housing is responsive in various segments of the housing markets, including geographic segments (e.g. metropolitan versus regional), price segments, and areas of low versus high population growth and job opportunities.
  • Examine the drivers of housing supply responsiveness, including the price elasticity of housing supply in Australian housing markets in regional and metropolitan areas.
  • Analyse whether the organisation and structure of the Australian developer and housing industries favour or impede the responsiveness of housing supply to demand pressures.
  • Propose policy development options that will improve the scale and speed of housing supply responses to market pressures in Australia.

Key Findings

  • 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 seems 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.

Key People

Lead researchers

Dr Rachel Ong

Dr Rachel Ong

Adjunct Professor

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Professor Gavin Wood

Professor Gavin Wood

Emeritus Professor

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Dr Melek Cigdem

Dr Melek Cigdem

Research Fellow

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Housing and Urban Economics

Developing a better understanding of how policy and economic activities can be enacted to improve micro- and macro-economic prosperity.

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