Why the government can’t supply its way to housing affordability

Sydney and Melbourne are entering a housing downturn. 

While the government has hoped record high levels of property development would have an impact, research shows supply is not behind the price falls.

Housing economists say the market slowdown is not due to additional home building but a drop in demand, in part thanks to the banking regulator making it more difficult for some to get a loan.

In fact, the effect of new supply on property prices has been very limited despite state governments largely pinning hopes on a surging home building industry to rein in affordability.

In a recent Australian National University paper Regional housing supply and demand in Australia academics Ben Phillips and Cukkoo Joseph found supply levels from 2001 to 2017 were larger than necessary to cover demand requirements, with thousands of excess homes in Sydney, but prices boomed over the time period.

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