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The Australian housing supply myth

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  • Murray, Cameron

    (The University of Sydney)

Abstract

Australia’s expensive housing market is claimed to be primarily the result of a shortage of supply due to town planning constraints, leading to political pressure on councils and state governments to remove planning regulations, regardless of their planning merit. We argue that this supply story is a myth and provide evidence against three key elements of the myth. First, there has been a surplus of dwellings constructed compared to population demand, rather than a shortage. Second, planning approvals typically far exceed dwelling construction, implying that more approvals or changes to planning controls on the density and location of development cannot accelerate the rate of new housing supply. Third, large increases in the rate of housing supply would have small price effects relative to other factors, like interest rates, and come with the opportunity cost of forgone alternative economic activities. Indeed, if the story were true, then property developers would be foolishly lobbying for policy changes that reduce the price of their product and the value of the balance sheets, which mostly comprise undeveloped land.

Suggested Citation

  • Murray, Cameron, 2019. "The Australian housing supply myth," OSF Preprints r925z, Center for Open Science.
  • Handle: RePEc:osf:osfxxx:r925z
    DOI: 10.31219/osf.io/r925z
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    References listed on IDEAS

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    1. Edward Glaeser & Joseph Gyourko, 2018. "The Economic Implications of Housing Supply," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 3-30, Winter.
    2. Ross Kendall & Peter Tulip, 2018. "The Effect of Zoning on Housing Prices," RBA Research Discussion Papers rdp2018-03, Reserve Bank of Australia.
    3. Nicole Gurran & Peter Phibbs, 2013. "Housing supply and urban planning reform: the recent Australian experience, 2003–2012," International Journal of Housing Policy, Taylor & Francis Journals, vol. 13(4), pages 381-407, December.
    4. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1253-1296.
    5. Nicole Gurran & Peter Phibbs, 2013. "Housing supply and urban planning reform: the recent Australian experience, 2003–2012," European Journal of Housing Policy, Taylor and Francis Journals, vol. 13(4), pages 381-407, December.
    6. Titman, Sheridan, 1985. "Urban Land Prices under Uncertainty," American Economic Review, American Economic Association, vol. 75(3), pages 505-514, June.
    7. Trent Saunders & Peter Tulip, 2019. "A Model of the Australian Housing Market," RBA Research Discussion Papers rdp2019-01, Reserve Bank of Australia.
    8. Murray, Cameron K., 2020. "Time is money: How landbanking constrains housing supply," Journal of Housing Economics, Elsevier, vol. 49(C).
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    Cited by:

    1. Murray, Cameron & Ryan-Collins, Josh, 2020. "When homes earn more than jobs: the rentierization of the Australian housing market," OSF Preprints 8f67h, Center for Open Science.

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