The TRUTH About Australia's Housing Supply Shortage - with Junge Ma

Is the housing supply shortage as bad as you may think? Or is it even worse than the government is letting on? In this episode, I'm going to translate mountains of data into three easy-to-understand points to give you a clear picture of Australia's housing supply shortage, why it's happened, how stock levels affected, planning changes, as well as one bonus factor so many people just don't know about Australia's housing market. I'm Junge Ma, lead research analyst at InvestorKit. Let's talk about the reasons behind the supply shortage.

Reason number one, declined stock mobility. I'm talking about hold period of housing has been increasing over the past decades across almost all cities. In Sydney, the average hold period of houses were just above six years back in 2008, but now it is close to 11 years. Melbourne is similar. In Hobart, back in 2008, the average hold period for houses were less than five years, but now as of 2025, it is above nine years.

These three are just some extreme examples, but it's happening across all states, all capital cities. Around 20 years ago, our average hold period was between four to seven years, but now we're talking about nine to 11 years. The longer owners are holding a house, the less mobility we have, the less supply we will be seeing in the market. But what's the reason behind the extending hold period? At a personal level, it can be many reasons.

It could be change of preferences, change of financial plans, or just because affordability is worsening, so you want to hold on to your current property for longer than planned. But at a national level, the major reason behind this is the surging transaction costs, especially in stamp duties. Since 1990, Australia's stamp duty brackets have barely moved. As a result, property buyers are paying a much larger share of their income on the property prices into taxes. In the past few years, we have seen adjustments in some states, but there's no material changes.

For example, in July 2024, New South Wales updated duty rates, but the core thresholds were left unchanged. In July 2025, the ACT government started to index concession threshold to their CPI, although that would only benefit home buyers instead of the broader market. Western Australia has raised stamp duty exemption threshold for first home buyers and extended off-the-plan concessions, but not for all types of buyers or all types of properties. And Victoria prolonged their off-the-plan stamp duty concession to 2026. Again, it's just for off-the-plan properties, not everything.

So overall, changes are happening, but there's no material changes. As long as the stamp duty brackets are largely untouched, the tax burden for property buyers will always be there, and our housing stock mobility will not be improved significantly. And reason number two, lack of land supply and slow planning processes. Australia is big, but at the same time, our land supply is very limited. And that is because most of the population is concentrated in a handful of major cities.

For example, Melbourne and Sydney each has about 20% of Australia's total population. Brisbane has around 10%, Perth has around 9%, Adelaide has around 6%, and the rest of Australia as a whole is hosting only 36% of Australia's population. And this handful of cities, their land supply is limited. In some cases, for example, Sydney and Adelaide, the urban areas are actually surrounded by hills that is further limiting the expansion of their urban area. As a result, rezoning has become a solution.

But in many cities, rezoning is taking a huge amount of time. Processes are slow because of the complex planning and approval systems. Even with some inner city areas has been successfully rezoned, the next step, the development, again, is taking a large amount of time. Development approval processes vary widely between councils to councils from states to states in terms of capacity, communication, capability, and so on. That's actually not just what I'm saying.

According to the 2024 State of the Housing Supply Report, planning regulations is significantly hinder new supply, particularly medium and high density housing. Developers often report that they are facing multiple overlapping or even conflicting planning systems and processes, and that would lead to costly delays. Again, for this hurdle, we are seeing some reforms, but not enough yet. Reforms we're seeing now include New South Wales' low and mid-rise housing reform and the state's significant rezoning policy. And in South Australia, we're seeing planning reforms in the state's housing roadmap.

In order to materially improve our planning systems and efficiency, we need many more reforms like this to really increase our housing supply. Reason number three, investor squeeze or investor activity being suppressed, plus the higher overseas migration in recent years has led to our current rental crisis. I'll explain this step by step. So since 2023, we have seen a surge in overseas migration coming into Australia. New migrants, when they first land, the most urgent demand would be in the rental market instead of the sales market.

We have seen a surge in overseas migration incoming to Australia since 2023, especially in our major cities. And as we know, housing demand from new migrants is usually in the rental market instead of the sales market. So naturally, this surge in migration to accommodate the extra rental demand, we need more rental supply, but we're not having enough rental supply. Why is that? Because we do not have enough investors or we do not have enough investment activity.

In Australia's rental market, private landlords are still the major provider of rental properties. Yes, we have other types of rental properties such as social housing or public housing and build to rent, but these types of rental supply, they're of a very small size. On the social housing side, stock of social housing has been increasing over years, but the share of social housing in our total housing stock has actually been declining. Back in the early 1990s, social housing accounted for more than 7% of our total housing stock. But in 2024, we only have 4% social housing in our total housing stock.

And when it comes to build to rent, it is even booming in some major cities like Melbourne or Sydney. But the reality is now it only accounts for 0. 1% of our total dwelling stock. There are thousands of new BTR units to be built, but even when those units are built, the total stock of BTR units would only account for 1% of our total dwelling stock. So in the end, private landlords or retail investors are still the major provider of rental properties.

However, investor activity has been subdued for much of the past decade. 10 years ago, in the established property market, investors, including first-time investors and experienced investors, accounted for around 35% of all property buyers in the market. But today, investors are only accounting for around 26-27% of all property buyers. Similar in the new development market, over 40% of buyers in the new development market were investors. But today, this number has declined to below 30%.

The decline in investor numbers is a result of years of investor bashing policies. Some of the policies include APRA's limit on investment loans and interest-only loans in those few years leading to COVID before they cancelled during the COVID. Land tax in many states is only payable on investment properties, not owner-occupied properties. In some states, for example, Victoria, investment properties face higher land tax rates or they have a lower tax threshold. And in the financial market, investment loans usually have a higher interest rate.

So all these policies are making property investments harder and harder and less and less comfortable. So over time, investment property stock is not increasing as fast as the growth in rental demand. In our opinion, to really increase our rental property stock and relieve the rental crisis, it is important to create an investor-friendly environment. Because you've stuck around to the end, I'm going to tell you the bonus factor that so many people just don't think of when it comes to Australia's property market. So despite the property market being so active in WA, Queensland, South Australia, at a national level, our total for-sale stock is actually 30% lower than where it was before COVID, so basically in 2019.

From 2022 to 2024, we were seeing a moderate increase in for-sale stock, but entering 2025, the stock level has been declining again. In the rental market, the same thing is happening. Before 2020, our national average vacancy rate was above 2%, but from 2022 to now, the vacancy rate has been stabilized at around 1. 2%, almost half of where it was five years ago. Now, just think of how much influence, how much impact the reduced stock would have on our supply and demand dynamics across the country, especially if we consider how much population has increased in the past three, four years.

So in summary, Australia's housing supply crunch cannot be simply solved by building more homes, because if that's the case, over the past decade, the total housing stock has increased by 20%, but at the same time, as I just mentioned, the available stock has decreased by 30%. As a result, to really solve the current crisis, we need many more reforms than just building new homes. We need a fairer tax system to encourage stock mobility. We need a more evenly distributed population, not just in our major cities, but across many more regional cities. To achieve that, we need stronger infrastructure improvement in regional areas, and we need a more efficient planning system to speeding up land release as well as development processes.

We need more diversified housing providers, including social housing and build to rent and more. And most importantly, to solve the rental crisis, we need a more investor-friendly environment. All these changes will take time to deliver. In the meantime, many markets will continue to face sharp supply shortage, which would continue to contribute to upward market pressure.