11 regions set to feel the brunt of the housing supply crunch

He also pointed towards Aussies holding properties for a longer average period of time, construction delays brought on by surging material costs and labour shortages and suppression of investor activity as the culprits of the concerning supply trend. 

With these factors at play, InvestorKit’s latest research showed that the country’s housing supply crunch will continue in 2023.

“We feel it both in the short-term (established for-sale supply) and in the short-to-medium run (new supply to be built),” Mr Paliwal stated. 

The report, which analysed more than 300 statistical area level 3 (SA3) regions, identified the 20 areas most facing a supply shortage of freestanding houses — 11 of which were identified as the “most impacted”. 

Upon crunching the numbers, the 11 regions set to feel the brunt of the housing crunch include Brisbane inner – north and Toowoomba in Queensland; Camden, Penrith, Albury-Wodonga and Wagga Wagga in NSW; Tuggeranong in the ACT; and Prospect-Walkerville, Charles Sturt and Onkaparinga in South Australia.

InvestorKit curated the ranking by assigning each region a Supply Shortage Score (SSS) out of five, which is based on factors including established supply risk, future supply risk, people movement, housing availability, rental pressure, and price pressure.  

Mr Paliwal explained that as supply in these regions tightens, house markets in these areas are also showing strong resilience against the recent downturn. 

Once the country acclimates to the lifted interest rates and consumer sentiment rebound, the expert said that these regions are positioned for “further robust growth”. 

But the expert also offered some solutions on how the supply crunch can be strategically tackled. 

“To resolve Australia’s housing supply shortage issue, we need a more even distribution of population, a more efficient planning system, a fairer tax system to encourage stock mobility, more investor-friendly policies, higher diversity in housing providers, and more, which would take a long time to achieve,” he explained. 

Here is a closer look at the top 11 regions forecast to get most impacted by the housing supply crunch: 

1. Brisbane inner – north, Queensland (SSS: 4.7 out of 5) 

While Brisbane inner north’s population increased by 26.1 per cent between 2012–2021, InvestorKit highlighted that the total number of for-sale listings fell by 44 per cent over the same period. 

Adding pressure to the market’s supply is the low level of building approvals in the region, as last year’s total number of building approvals only represented 0.78 per cent of all houses.

Notably, the current volume of stock on market is also at a low level of 1.18 per cent relative to the region’s total house stock.

While stock in the region has been observed to recover since early 2022 due to decreased sales volume and a slight increase in supply, it still sits at a fairly low level. 

The imbalance in supply and demand has led to a 28.3 per cent annual growth in the region’s house prices over the year to August 2022. 

In the rental market, vacancy rates are much lower than the same time last year, currently sitting at a low 0.7 per cent — indicating a tightening rental market. The low vacancy rate has also resulted in rental prices rising 10.7 per cent within a year.

2. Camden, NSW (SSS: 4.7 out of 5) 

Camden’s population increased by 35.7 per cent in the nine years to 2021, but the total number of for-sale listings decreased by 24.8 per cent over the same period.

On top of this misalignment in supply and demand in recent history, data showed that the number of building approvals has been declining since 2018.

Building approvals in the present year represent only 1.23 per cent of all houses in the region, indicating a tightening supply level. 

The current volume of stock on market is low (0.83 per cent) compared to the region’s total house stock. 

Over the past 12 months, there has been a 47.5 per cent increase in sale listings, which has led to a recovery in inventory since earlier this year. However, inventory still sits at a low level, which has resulted in an 18.9 per cent increase in house prices over the 12-month period to August.

3. Penrith, NSW (SSS: 4.5 out of 5)  

Data showed that the population in Penrith has risen by 21.9 per cent in the nine years to 2021 — outpacing the 2.3 increase in the total number of listings for sale over the same period. 

Furthermore, InvestorKit highlighted that the declining level of building approvals in the region has added to the supply shortage. Last year, the total building approval number in the region represented only 1.56 per cent of all houses. The figures equate to almost half the rate seen in 2018. 

The low housing stock in the region’s market (which is currently just 0.83 per cent of the region’s total housing supply) has also helped to bolster house price growth in the area by 15.6 per cent in the 12-month period to August 2022. 

Penrith’s tight rental market has also helped the region garner a high place on the list. Vacancy rates in the area have been hovering at crisis level (below 1 per cent) for the past 12 months, which has led to an 11.1 per cent rental growth in a year.

4. Toowoomba, Queensland (SSS: 4.3 out of 5) 

The observed mismatch in supply and demand in Toowoomba strongly positioned the Queensland region in the list, according to InvestorKit. 

Over 2012 to 2021, data showed that sale listings in the region had fallen by 39.9 per cent, while the population increased by 9.8 per cent.

Additionally, InvestorKit pointed out that the balanced level of building approvals in the region (which represents 1.71 per cent of all houses this year) does not contribute to easing the supply tension. 

Currently, the volume of stock on the market is still low relative to the region’s total house stock at a mere 0.77 per cent. 

And while the recent softening demand and boost in supply had led to a recovery in inventory, the low level of stock in the market has resulted in a 19 per cent growth in prices over the year to August 2022. 

In the rental market, the region’s vacancy rate has been observed to be at extremely low levels for the past few years, indicating a supply crisis in the rental market. The tight rental market conditions have also resulted in a 16.7 per cent rental price growth in a year.

5. Mount Gambier, South Australia (SSS: 4.5 out of 5) 

Similar to trends observed in other regions on the list, the population in Mount Gambier has risen 5.8 per cent over the past decade, but the number of for-sale listings has seen a sharp decline over the same period.

The low level of building approvals — which clocked in at just 1.48 per cent of all houses this year — is not enough to relieve the city’s supply crisis, according to InvestorKit. 

Additionally, the current volume of stock on market is low compared to the region’s total house stock, sitting at 0.48 per cent.

The decreasing number of for-sale listings, which has fallen by 31.9 per cent on a year-on-year basis, has resulted in a 36.5 per cent drop in inventory level despite a slight decline in sales volume.

Consequently, the trend of low supply coupled with strong demand in the region has led to a 22.8 per cent annual price growth to August 2022.

In the rental market, vacancy rates have been below 1 per cent for two years, indicating a rental supply crisis and has led to 16.7 per cent rental growth in a year.

6. Albury-Wodonga, NSW (SSS: 4.4 out of 5) 

Data showed that Albury-Wodonga’s population increased by 6.7 per cent in the nine years to 2021, but the total number of for-sale listings dropped by a dramatic 65.9 per cent over the same period — indicating that the market has seen demand significantly outpace supply and resulted in tighter market conditions. 

Additionally, the current volume of stock on market is low compared to the region’s total house stock, at 0.82 per cent. 

And while demand for sales volumes has fallen by 20.4 per cent, InvestorKit highlighted that the low level of listings is weighing down the recovery in inventory levels. This has resulted in a 21.9 per cent price growth annually to August 2022.

The region’s rental market paints a similar picture, as data showed Albury-Wodonga’s vacancy rates have been at crisis levels over the past 12 months, which has led to a 12.2 per cent increase within a year.

7. Tuggeranong, ACT (SSS: 4.3 out of 5) 

While Tuggeranong’s population has been recovering steadily in the past five years by recording a 3.9 per cent increase, InvestorKit noted that the number of for-sale listings did not increase during the same period. 

According to InvestorKit, the extremely low level of building approvals (only 0.19 per cent of all houses this year) has also been insufficient to match the demand for housing. 

Furthermore, the current volume of stock on market is very low compared to the region’s total house stock, currently at 0.46 per cent. 

And despite inventory recovering as sales volume declines and the number of listings increases, the region’s housing stock is still at a relatively low level. This imbalance in supply and demand has led to a 22.2 per cent annual price growth to August, InvestorKit’s data showed. 

In the rental market, vacancy rates have been hovering at a crisis level of less than 0.5 per cent over the past 12 months — leading to 14.3 per cent rental price growth in a year.

8. Wagga Wagga, NSW (SSS: 4.3 out of 5)  

Between 2012–2021, Wagga Wagga’s population increased by 5.6 per cent, but the total number of for-sale listings dropped by 66.9 per cent. 

Adding to the region’s supply woes, data showed that the balanced level of building approvals (which represented 1.52 per cent of all houses this year) had done little to ease the housing crunch. 

Notably, the current volume of stock on market remains at a low of 0.68 per cent compared to the region’s total house stock.

Although demand for sales volume has slightly declined by 22.5 per cent in a year, the region’s supply is still 1.9 per cent lower year-on-year. The low inventory level has resulted in a 22.8 per cent annual growth in house prices to August this year.

But while Wagga Wagga’s inventory remains at an extremely low level, InvestorKit noted that supply has recently started its slow recovery.  

9. Prospect-Walkerville, SA (SSS: 4.3 out of 5) 

Data showed that Prospect-Walkerville’s population had increased 6.1 per cent in the nine years to 2021, while the total number of for-sale listings increased by 6 per cent over the same period.

Like other regions in the list, the current volume of stock in Prospect-Walkerville’s market is also low compared to the region’s total house stock, at 0.78 per cent.

InvestorKit noted that a 6 per cent year-on-year increase in supply coinciding with decline in sales volumes has led to a gentle recovery in inventory.

However, the market’s inventory remains at an extremely low level, which has resulted in a staggering 44 per cent annual growth in median house price to August.

Screws have also been tightening in the region’s rental market, with vacancy rates decreasing over the past 12 months and currently sitting at a crisis level of 0.6 per cent. 

This downward trend in the available number of rental listings in the region has led to rental prices growing 11.1 per cent in a year.

10. Charles Sturt, South Australia (SSS: 4.3 out of 5) 

Data showed that Charles Sturt’s population has risen by 10 per cent in the nine years to 2021, while the total number of for-sale listings decreased by 40.2 per cent over the same period.

With around 600 new building approvals this year — representing 1.92 per cent of all houses — InvestorKit highlighted that the housing supply in the region remains inadequate to answer the demand in the market.

On top of this, the current volume of listings on the market is only 0.84 per cent of the region’s total house stock. 

InvestorKit highlighted that inventory in the region has begun trending upward since mid-2022, as listings increased and sales decreased. 

However, the recovery in stock has been glacial, resulting in inventory remaining at a low level. This has resulted in a 19.3 per cent annual growth in house prices to August. 

In the rental market, vacancy rates have declined to a crisis level of 0.3 per cent, leading to 12.8 per cent rental price growth in a year.

11. Onkaparinga, South Australia (SSS: 4.3 out of 5) 

Located on the southern fringe of Adelaide, Onkaparinga has seen a steady increase of 6.5 per cent of its total population over the past decade. However, supply was unable to catch up with this increase in demand, with the number of for-sale listings trending down during the same period. 

Supply conditions have not improved in current times, as the present volume of stock on market is low compared to the region’s total house stock, at 0.64 per cent.

While InvestorKit observed an easing in market pressure as demand slowed down and supply level was lifted, it noted that the region’s total stock remains at “a fairly low level”. This has led to a 23.7 per cent annual price growth to August this year. 

In the rental market, vacancy rates are at a crisis level of 0.2 per cent, which has led to a 17.3 per cent growth in rental prices within a year.

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