Factors including a 2011 peak in commodity prices (and subsequent decline) and an aging population could further reduce the economy’s potential demand for housing.
“Severe housing correction is an outside chance if Australia experiences a mining bust – i.e. sharply lower commodity prices combined with a big reduction in mining investment. This combination would cause sharp falls in incomes, a big increase in unemployment and potentially a credit squeeze.”
In order to free up the supply of housing, van Onselen says the government needs to do the following:
1. Ensure an adequate supply of affordable land for housing by removing regulatory growth constraints such as urban growth boundaries and restrictive zoning. This would increase competition and contestability in the land market and lower land prices;
2. Speed-up development approval processes, so that housing supply is able to respond more quickly to changes in demand;
3. Ensure housing-related infrastructure is adequately financed and provided in order to facilitate the provision of affordable housing.