Key takeaways
Many policymakers believe that building more apartments will solve Australia's housing shortage. But that approach doesn't address the deeper structural issues of our housing market.
Many of the new apartments being built are in high-rise towers in inner-city and near-city locations, far from the liveable neighbourhoods that many Australians desire. Further, the demand is not just in and near the CBDs, but also in the suburbs.
Building more apartments is only one piece of the puzzle. We also need to consider the surrounding infrastructure and amenities to create communities, not just boxes for people to live in.
Investors are snapping up new apartments, often overseas buyers, rather than owner-occupiers. This creates a two-fold problem: first, it pushes up prices, and second, it makes it even harder for first-home buyers to get a foot in the door.
The issue of affordability is not just about building more apartments, it's about building more affordable housing options. If we don't tackle the affordability issue, we'll continue to see a divide between those who can afford to buy and those who are perpetually locked out of the market.
Environmental and sustainability concerns are important when building more high-density apartments. We need to think about sustainable, energy-efficient homes that cater to modern living and minimize environmental impact.
Supporting private property investors is another crucial piece of the puzzle in addressing the housing shortage. By providing consistency, such as long-term legislative frameworks or tax incentives, governments can encourage more private investors to provide rental housing.
There's an old saying: "If the only tool you have is a hammer, every problem looks like a nail."
When it comes to Australia’s housing shortage, many policymakers seem to be wielding that hammer, believing that the solution is as simple as building more apartments.
But let me tell you, it’s not that straightforward.
Sure, we’re experiencing a genuine housing shortage, especially in our major cities, but flooding the market with more apartments is not a silver bullet.
Here’s why simply increasing supply doesn’t address the deeper, structural issues of our housing market.
Mismatch between supply and demand
You’d think more apartments would automatically cater to those in need of housing, right?
But it’s not just about quantity; it’s about quality and location. Many of the apartments being built are often in high-rise towers in inner-city and near-city locations, far from the liveable neighbourhoods that many Australians desire.
These new apartments might be great for young professionals or students, but they’re often not suitable for families, retirees, or those who need a bit more space.
Further, the demand is not just in and near the CBDs.
It’s in the suburbs, close to schools, parks, and amenities that families value.
Of course, the challenge is finding sites in Australia's middle ring suburbs that would accommodate large apartment complexes and then fighting the NIMBYs who don't want large development in their backyard.
Yet, the focus remains on building towers in areas where land is most expensive, leading to apartments that are priced out of reach for the average buyer.
Quality over quantity
One of the most concerning trends in recent years has been the compromise on quality.
The push to build more and build quickly often results in poorly constructed buildings with defects and issues that become evident just a few years after completion.
Many Australians have been burnt by stories of cladding problems, water leaks, and other defects that make apartment living less desirable.
This erodes confidence in apartment living, and if people don’t trust the quality of new developments, they’re unlikely to buy, no matter how many are built.
Lack of infrastructure and community amenities
Building more apartments is only one piece of the puzzle.
What’s equally important is the infrastructure and amenities that support these new dwellings. It’s no good having hundreds of new units if there aren’t enough schools, parks, public transport options, or healthcare facilities nearby.
We need to create communities, not just boxes for people to live in.
Take a look at some of the most successful suburbs and neighbourhoods—they’re more than just a collection of homes; they offer a lifestyle.
And that’s what’s missing when we focus purely on increasing apartment numbers without considering the surrounding infrastructure.
Investors vs. owner-occupiers
In the past, a significant proportion of new apartments were snapped up by investors, often overseas buyers, rather than owner-occupiers.
This creates a two-fold problem.
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – November 2024
- Also read:This week’s Australian Property Market Update – Latest Data, State by State November 19th 2024
- Also read:Melbourne property market forecast for 2025
- Also read:Sydney property market forecast for 2025
- Also read:Brisbane’s property market forecast for 2025
Firstly, many of these apartments end up vacant, as overseas investors often hold their properties purely for capital growth rather than being rented out or lived in.
Secondly, the influx of investor activity pushes up prices, making it even harder for first-home buyers to get a foot in the door.
If we’re serious about addressing housing shortages, we need to shift our focus towards developments that cater to owner-occupiers, ensuring more Australians have a chance to buy their own home.
The issue of affordability
Building more apartments does not necessarily mean they will be affordable.
In fact, many new developments are marketed as luxury properties, attracting higher-end buyers and investors.
The problem is these apartment towers are built where the cost of land is high and then the cost of constructing high-rise towers is many times more expensive than the cost of building single-level homes, meaning the square metre cost of delivering high-rise apartments is considerably more than that of delivering a new home in the outer suburbs.
This does nothing to alleviate the affordability crisis facing everyday Australians.
We need more affordable housing options, not just more housing.
For many Aussies, the dream is still to own a home with a bit of land, not necessarily an apartment in a high-rise building.
If we don’t tackle the affordability issue, we’ll continue to see a divide between those who can afford to buy and those who are perpetually locked out of the market.
Environmental and sustainability concerns
We can't ignore the environmental impact of just building more, especially high-density apartments.
The construction process is resource-intensive, and many of these high-rise developments have significant carbon footprints.
Moreover, the lack of green spaces around such developments can create heat islands, making them less desirable places to live in the long term.
We need to be thinking about sustainable, energy-efficient homes that cater to modern living and minimize environmental impact—not just more of the same concrete blocks.
So, what’s the real solution?
If building more apartments isn’t the answer, what is?
The solution lies in a more holistic approach:
- Diversifying Housing Options: We need a range of housing types—townhouses, terraces, low-rise apartments, and detached homes—to cater to the diverse needs of our population.
- Revitalizing Underutilized Land: There’s a huge opportunity to redevelop older, underused land in established suburbs. This could mean converting old industrial areas into mixed-use communities or allowing for more medium-density housing options.
- Build-to-Rent: Encouraging the build-to-rent sector could provide more long-term rental options and increase the quality of rental properties available.
- Supporting Private Property InvestorsAnother crucial piece of the puzzle is encouraging private property investors who are already providing much-needed rental accommodation.These everyday Australians play a vital role in the rental market, yet they often feel under attack from constantly changing legislation and policy uncertainty.Frequent changes to rental laws, taxes, and regulations not only create frustration but also discourage potential investors from entering the market.By giving property investors a sense of stability and certainty, we can encourage more of them to provide rental housing.This approach is not only quicker but also more cost-effective than offering large incentives to corporations to build "build-to-rent" projects.After all, private investors have been the backbone of the rental market for decades, and with the right incentives, they can continue to play a significant role in addressing the housing shortage.
If governments focused on providing consistency, perhaps through long-term legislative frameworks or tax incentives, more private investors would be motivated to expand their portfolios or remain in the market.
This could help meet the demand for rental accommodation far more rapidly than waiting for large-scale, build-to-rent developments to materialize.
In essence, supporting and encouraging residential property investors should be a priority if we genuinely want to see an increase in rental housing supply and affordability in the short to medium term.
- Encouraging Regional Growth: Not everyone needs to live in Sydney or Melbourne. Investing in regional infrastructure, transport links, and job opportunities can help take pressure off the major cities and provide more affordable housing options.
Final thoughts
Simply building more apartments is like treating the symptom rather than the cause.
The real solution requires a multi-faceted approach that looks beyond just numbers and focuses on creating homes, not just houses.
It’s about building communities, ensuring quality, and providing a range of options that cater to all Australians, whether they’re first-home buyers, downsizers, or growing families.
The sooner we move away from the idea that "more is better" and start focusing on "better is better," the closer we’ll be to solving our housing shortage crisis.
