Melbourne tackles the national housing shortage head on

Long time rivals Sydney and Melbourne are at logger heads once again. This time though, it’s all about the housing shortage that continues to plague our property markets; the current national shortfall in residential dwellings is estimated to be around 200,000 and counting.

With new home construction badly needed to address the undersupply that is worsening as our population continues to grow exponentially, it seems Melbourne is racing ahead of Sydney in the new home construction stakes.

A recent report in The Age claimed that the national housing shortage, “can be placed almost entirely at Sydney’s door while Melbourne is building more new houses than it needs.”According to a recent report from Goldman Sachs, in two years time it is estimated that we will have a national undersupply of 250,000 dwellings; nine times higher than the last significant housing shortage experienced in the mid-1970’s.

As many analysts have already pointed out, a housing shortage not only makes it difficult for renters to find accommodation, it also drives up property prices and creates affordability issues.

However a recent building industry prospects paper from BIS Shrapnel claims, “For 2009-10 dwelling commencements [in Victoria] are estimated to have lifted 27 per cent to 53,350 starts,” meaning the construction of 53,350 new homes was started last year.

The report says that this represents a record level of housing construction for Victoria and is above the current estimate for underlying new home demand. So with more new dwellings being built than required, does Victoria still have an undersupply issue and if so, why?

Well, the short answer is yes, we still need more houses namely due to the rapid population growth that occurred in Victoria between 2006 and 2010 which caused a backlog in housing demand. New home construction wasn’t keeping pace with the influx of new residents and as a result, there was an estimated shortfall of 42,000 dwellings in 2009. With today’s increased building activity though, it’s expected that this undersupply will fall to 29,000 houses by 2013.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit

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