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Why The Australian Govt Is Causing The Housing Market To Collapse · The Follio Property Podcast

• 0:00
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• 1:01
  The Labor government needs to be held to account and they have delivered on absolutely nothing when it comes to housing. Construction costs essentially went up by 40% in a very short period of time. If you're waiting for that period where you're going to wait for construction costs to come down, you'll never do anything because they're not coming down. This is the new norm.
• 1:17
  Rents are rising faster than wages here in Australia. Significantly too, not by a small margin. We've let too many of the wrong skill sets into the country and students can't build houses. When's common sense gonna prevail? So this could take a decade to undo what the government has done in the last three years. Will Australia forever be in a housing crisis? Yeah, when we look at the PropStack Construction Index, we're miles behind to the point now where it will take us well past 2030. If supply starts to outweigh demand, put a cross against both those numbers, we could start to see that market falter, potentially in 2026.
• 1:49
  You're listening to the Folio Property Podcast. I'm Rhys Bettle and I'm here each week with my co-host Lachlan Delahunty. If you're enjoying the show, hit subscribe, give us a five-star review. Left you alone for a couple of weeks, but we want them coming. Helps us grow the channel in 2026. Another thing, Lachlan, I haven't spoken to you about this, but we've been working with our chief economists and wanting to try to add value to the podcast community.
• 2:14
  I had a meeting with him last week and from February we're going to have a national investment report. Fantastic. Which just focuses on a purely on an investment lens across all capital cities. Probably be some commentary on regional as well. And that'll be exclusive through the podcast community.
• 2:29
  Yeah, great. That's really helpful. That's what we lean on. Obviously, I'm on the phone to him every day. Every time there's an article or news release, we dive deeper into the data. So that's good that the community here can get access to that. Perfect. And if you want access to this report, there will be a link in the show notes just with your name and your email. From February, we'll start sending that report out. Yep. If you want that report, just comment report in this episode, and we'll put you on the list. So when that's released, you'll get first access.
• 2:55
  Excellent. Okay, let's kick it off. Will Australia forever be in a housing crisis? It's a topical subject and I think at the moment it's creating probably the biggest headlines in property and real estate in Australia, right? The divide has never been so great. Yeah, it's a consistent, it feels like a consistent message every year around housing.
• 3:14
  And there seems to be a common trend where we're really not touching on one of the sides of supply and demand. So I thought it would be good to break down where the problem is. Is there any solution? Are we forever going to be talking about this every year moving forward? Let's get into the nitty gritty now, building approvals. I think this is what we're seeing a lot in the media. The Albanese government, with their new homes initiative, promised 300,000 homes. They were 37% behind on that.
• 3:42
  So my question is, has the Albanese government failed with its new homes initiative? Without a doubt. You know, the Labor government needs to be held to account. Everything they said and stated was to win voters, and they have delivered on absolutely nothing when it comes to housing. We spoke about this on the podcast last year in the lead up to the election that, you know, both governments, and we're not here to take sides, both governments were pitching demand orientated solutions.
• 4:07
  And just look at what the Albanese government have done. They brought forward the first home buyers initiative. What has that done in the market? We've seen national markets increase by 5%, pretty much 5% in almost a quarter. Demand, not supply. Everything that they've put forward has pretty much been predicated to win voters and has not on the supply side of the equation on how to actually bring on more housing.
• 4:29
  And that's how to increase building approvals, how to reduce the time it takes to get a home to site and slab down in construction in play. They've opened up their borders to thousands and thousands and thousands of people. Yet for the first six months, skilled laborers weren't on the skilled jobs list. So all these people are coming in the country. None of those people can actually assist on bringing on more housing. So you're creating more of a demand problem without letting the people that actually need to build these houses into the country. Like that's obviously been rectified in the last-
• 4:57
  Six months, skilled labourers were put on the skilled jobs list. But as a leader of our country, how can you get that so wrong? And we're so far behind. We're not six months, 12 months, two years behind. This could take a decade, and that sounds extreme, a decade to undo what the government has done in the last three years.
• 5:15
  It's fascinating because I don't know if there's green shoots appearing, but building approvals actually jumped 15% in November, but there's too much of a lag. They're just not getting them completed. So it probably echoes what you're saying there in terms of lack of skilled labors there, lack of people in the industry being able to sort of complete these houses. But approvals are ticking up, but it seems like we still don't have the people there to get these houses built in time.
• 5:39
  No, this is the problem. And you talk about it, yes, approvals are increasing. Approvals are increasing, but approvals are completing, but starts and completions have stagnated across the country. So, yep, absolutely, you can tick a box, tick a box, tick a box, but get all the approvals in the world. If there's no one there to build it, we're not going to see more housing into the market. So, yeah, it's two-pronged, right? Approvals is a huge part of it, and that was such a lag because it took 12 to 18 months to get approvals in place. Once you get approval, there's so much red tape through trying to get, for instance, in Western Australia...
• 6:09
  There does appear to be some green shoots appearing with building approvals actually jumping up 15% in November, yet homes aren't finishing fast enough. What's stopping the approvals turning into actual homes? Yeah, and you talk about the surplus rate. So, yes, approvals are increasing, but we're so far behind. We would have to see supply outstripped demand. Yeah.
• 6:28
  for the next three to four years to make up for the lost ground that we've lost since COVID. And that's the real problem. So we need to see that. But like I said, although approvals have increased, look at the completions data. That's stagnated. In some areas, it's going backwards. So you can prove the government's pushing through, trying to push through these larger developments. But we've got no one to build them because of the first 12 months of letting people into the country, the people that we need to build homes, you'd speak to every builder. What's the biggest issue? I can't get trades. I can't get trades. Can't get laborers. Can't get trades.
• 6:55
  Okay. And the government wasn't letting skilled laborers into Australia. Like, when's common sense going to prevail? So the biggest problem we have, we've let arguably too many of the wrong skill sets into the country to be able to deliver on what we need, which is housing. So your question at the start, you know...
• 7:11
  are we going to have this issue? We will have this issue for the remainder of this decade and most likely beyond, unless further measures, like serious measures, are taken into place. And I'm talking about on the supply side, how can we find a way to build houses quicker?
• 7:27
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• 7:53
  Government really did relax their policies on student visas coming into the country, made it a lot easier for students to enter. Fantastic. So that hits the demand equation because we need housing for students and students can't build houses. Fantastic. Well done, Albanese. And this goes as a nice little segue into rents. So students are obviously going to be driving that rent demand too. And rents are rising faster than wages here in Australia.
• 8:16
  significantly too, not by a small margin. It's significant. Medium rents went up 1.6% last quarter to $6.50 a week. And that's the inflation data that we're talking about. So when you talk about when interest rates rise, whether it's in February, March or April, thank the government for that because rents are rising because of the housing crisis.
• 8:34
  So it all correlates to the same issue, it seems here. Rising rents, not building enough houses, falling behind on supply, and we're not sorting out the right people into the country. Essentially. You've summed it up pretty well there, Reece. And I can't see that unwinding until something gives, until someone realises what's creating the problem and where the solution is. And like I said, without taking sides, both Labor and Liberal went to the polls last year with all demand-orientated solutions to the housing crisis.
• 9:03
  no one addressed the supply side. And that's when I keep coming back to the issue. And COVID was terrible for a lot of reasons. And one of those reasons, a lot of builders went bust, right? Because of the construction increase and arguably they weren't supported and it's a whole other podcast. But now we don't have enough builders, we don't have enough trades and that needs to change and needs to change quickly. Otherwise we're going to get further behind.
• 9:26
  Okay, let's talk through construction costs. This doesn't get highlighted as much as what some of the other approvals and lack of supply, but they're surging. So construction costs are surging. What's driving this to Aussie homebuyers at the moment? Well, it's COVID-led this scenario, and a lot of what we're going to talk about today, COVID was a –
• 9:45
  iconic moment for many reasons, but certainly in the construction industry, because construction costs essentially went up by 40% in a very short period of time. And if you look at the cycles of construction costs over the last 30 years, like the property market, like any cycle, it typically inflates during a period of time, and then it stagnates.
• 10:03
  and then it inflates and stagnates. You never see construction costs reduced, because why would it? Because everyone gets comfortable, and the moment it starts to stagnate, that's when builders start to make their margin, because they're charging the same amount or more, but costs are not going up at the same rate. So you see these cycles, and everyone's like, when are construction costs going to come down?
• 10:20
  They won't. This is the new norm. 40% up from where they were pre-COVID is the new norm. And in parts of the markets around Australia, they're still rising in some areas. So if you're waiting for that period where you're going to wait for construction costs to come down, you'll never do anything because they're not coming down. If you're waiting for them to stagnate, I think we've probably seen the most stability in the construction industry for the last five years at this period of time.
• 10:44
  It's interesting you say that because Q4, although not a massive increase, still a 1% increase, the biggest rise of last year. I mean, your commentary is correct. It was probably pretty stable last year, but Q4 did have the biggest uptake of the year. Is that a trend heading into 2026? Do you see stabilisation or do you see that being a bit of a trend moving into 2026 with the increase in construction costs?
• 11:07
  Yeah, I think the difference in this cycle, you're talking a 1% increase versus a 40%, right? So it's marginal. This is going to be consumer-led, right? Supply and demand dynamics when people want something, and now it's highly in demand because we're so undersupplied. Obviously, suppliers can charge more for that product if it's highly in demand. So I don't think it will be market dictated, say macro events such as COVID-19.
• 11:27
  it will be more consumer-led supply and demand. So when it is led by supply and demand, you typically see the fluctuations dramatically less than what you do when it's such a macro event. So I think we'll see some modest uptick because it's going to be high in demand this year because we're in such an undersupply nationally. Construction and people building and trying to create new homes is going to be a big push for that in 2026. So I will see, I think, sub-5% increase in construction costs this year would be my prediction.
• 11:57
  Western Australia and South Australia had the biggest increase across the country in terms of construction costs. Why is that? Why particularly those states? Is there anything that they share in common or is it a particular industry that's driving that? Obviously, proximity. So a lot of products and materials are East Coast manufacturers. So when you travel time, et cetera, to get to Western Australia and even South Australia, although much closer to the East Coast...
• 12:22
  There's an element of that where they're paying a premium in comparison to Sydney and Melbourne. When you look at Western Australia and isolate Western Australia, the cost of building a home in Perth is higher than anywhere else in the country. And that's because of that material play, as I discussed. It costs more to get product here than it does pretty much anywhere else in Australia. Double brick. Yep, double brick homes. There's a shift away from that. We're seeing that with steel and timber coming into play.
• 12:45
  because the industry in Perth has been so custom to building a double brick home for the last 40, 50 years. But it's also the labor factor in Perth. There's such a shortage of labor in the construction industry because you're competing with the mining jobs. And typically laborers, bricklayers, those sorts of things that may get paid somewhere between $150,000 to $200,000 good money in Perth are getting dragged up north where they can work six months of the year and make an extra $50,000 to $100,000.
• 13:13
  So, constantly Perth and in the construction industry are losing trades to the mining industry. That's the reason you're sort of the double-edged sword really. The labour cost is much higher and your materials are higher, therefore the cost to build a home is more expensive than anywhere in the country. Adelaide's a little bit different in the sense that it's not competing with the mining industry, but it is very volatile. When you see a really tight market like Adelaide and South Australia is at the moment, where clearly demand outweighs supply significantly.
• 13:41
  That's typically when builders really make their margin. It's very secular in Adelaide and at the moment, builders can charge what they want because there's such a shortage of homes and we've seen them increase their prices dramatically over the last three years because the demand's there and people will pay that money because the established housing market went up so significantly. Then it made sense the cost of the build. It's like, well, if I build a home, I can probably build it for less than what it cost to be established and then you'll start to see that flip this year.
• 14:07
  So WA does seem to follow the similar tune to what we're saying from a national sentiment perspective. Completion's down 11% year on year, $4,500 behind target. Seems like WA from a construction perspective is probably in the worst position out of any of the state in the country.
• 14:23
  Yeah, when we look at the PropStack Construction Index, we're miles behind and have been for six years, right? And reference that. So we spoke about that on a couple of episodes, maybe a market update, but we have this index that can show, I guess, in terms of what supply is needed for the population growth or the, I guess, the amount of demand that's there. There was an interesting one when you look in Perth or WA where you can see where we oversupplied the market.
• 14:47
  Yeah, in 2016, we oversupplied the market by 100%. That's significant, right? And that's why we're seeing stagnation in the market, because supply completely outstripped demand. But since then, we haven't been building enough homes. And in about 2018, 2019, we got to that equilibrium, where we're probably equilibrium, where we're building enough homes for the people coming in.
• 15:06
  And then from 2019, we've been under supplying and it's compounded to the point now where, yeah, like I said, it will take us well past 2030, I believe, until we can keep up with the demand coming in, let alone try to catch up from the shortfall that we're so far behind.
• 15:21
  And the last 12 months, WA has led the country in terms of population growth. Yep. And that is a percentage. So, for instance, obviously, a smaller population than Melbourne or Sydney. So, in terms of the actual growth, it's not going to be as high as what those are, but compared to their population size, it led. Interstate migration on a long-term trend is well above what it previously was. So, I think roughly we were looking at about 10,000, 12,000 people coming in per year. Yep. Before COVID, actually, we were losing around that.
• 15:51
  Yeah, we're losing $15,000 to $20,000, yep. Each year. You've spoken to our economists recently, and the last quarter there's probably been a little bit of a change with that. Yeah, we've just seen interstate migration tick down for the first time since COVID. So to give you context, Reece, for the March quarter of 2025, we had almost 3,000 people come into the state, so about 1,000 people a month come to Western Australia from the East Coast, essentially, and that ticked down in the June quarter of last year. Obviously, this type of data is delayed by six months.
• 16:18
  to 2,200. So that's a little bit of correction. And if you see if the interstate migration, the overseas migration, which is arguably the most significant, right, because we typically get about, Perth average is about 10,000 to 11,000 people into the state every quarter from overseas. And that has been consistent since COVID. It peaked in December 22, when we got 21,000 people in that December quarter.
• 16:41
  That has been slowly reducing, which the most significant reduction was in March 2025, got down to 13,500 for that quarter. And then the June quarter of 2025, which that data was released late last year, got down to 6,700 people that come in for that quarter. That's almost half the people. So we are seeing that migration story start to soften a little bit within the Western Australian market. But like you said, we're still not building enough homes for those people coming in. And certainly that doesn't account for how far we're behind.
• 17:11
  That is a telling story to see where the market at is in Western Australia to say that that could be easing in terms of that. When you have 13,000 people coming in from overseas and another, when you have, look back to 2022, Reece, when you've got 20,000 people coming in in a quarter into Western Australia and another 5,000 to 6,000 coming in over state, 20,000 people coming in for a quarter. To keep up with that supply is incredible.
• 17:37
  not achievable regardless of how quickly you can build or what the government, state government can do to bring on supply. There's no policy that's going to create enough housing quick enough to keep up with that demand. So to see that slowly soften will give the ability to hopefully those green shoots to start to catch up on this surplus that I talk about. Yeah, be interested to track that next quarter to see if it is actually a developing trend or was it just some delay in the data? Yeah, as soon as we have the data, we'll bring it to the audience in those monthly reports.
• 18:04
  Okay, so WA there, summary, it's probably in a worse position than the national average, really. Significantly. And that's why, you know, if you look about our forecast we did a couple of weeks ago, did our predictions for the Australian property market, that's why Western Australia, again, will be one of, if not the highest performing market in 2026. Yep.
• 18:20
  Let's go on to New South Wales and probably more of a positive sentiment, I guess, with New South Wales. It actually had the strongest quarter for commencements and completions in the last five years. When you say positive, so this is interesting to the viewers. It's positive from a housing crisis point of view. It's a negative from a property investment point of view. 100%.
• 18:36
  And that's where arguably it's controversial that as an investor in Western Australia, you'd be quite excited about the undersupply because it's going to continue to push prices higher. In New South Wales as an investor, I'd be concerned because suppliers you're about to go into is starting to potentially outstrip demand. But from someone who's trying to get into the market in New South Wales, it's starting to look more promising than it would be in Western Australia.
• 19:00
  Absolutely. So the big thing is they're catching up on commencement and completions. Like I said, it was the biggest quarter in the last five years. On that migration standpoint as well, they're 20% below what their long-term trend is for interstate net migration. New South Wales always loses more people than they gain naturally. For interstate migration because they get so many people from overseas. Correct. Correct. And that's typically same as Victoria.
• 19:27
  Yeah, that's up even higher. So they're losing about 15% to 20% more people per year. Than their long-term average. Yeah. So COVID was a big play with this mass exodus or lifestyle. Yeah, from the major cities. Yep. Correct. And it's the cost of living in Sydney, right? Rent's significantly higher. Cost to buy a home significantly higher than anyone in the country. So it's no surprise that people are moving up and down the coast for cheaper options.
• 19:50
  I mean, you said it right there, rents. So an average person in Sydney pays $9,620 more than a person in Melbourne. Say no more in terms of trying to look at a market where you see value. You know, that's significant. So actually, when you look at New South Wales compared to the Australian average, it's probably in a better position than, you know, as a whole Australia is or it's starting to show some green shoots. We just touched on the rent comparable to Victoria. Victoria's completions hit an 11-year low. Yep.
• 20:17
  So completions are well down. Is that down? We've mentioned on previous podcasts when we've spoken about the Melbourne market, the max exodus in COVID, especially for Victoria, as we know, a lot of them went up to Queensland. There's an oversupply in the market. Has that completions at 11-year low have anything to do with maybe some oversupply that they previously had during the COVID period? Yeah, again, it's two-pronged. It's...
• 20:41
  both demand and supply influenced in this scenario. So we speak about it a bit on the podcast, a lot of people left. Victoria, we're seeing, we talk about both Sydney and Melbourne typically have negative interstate migration. We see that with Sydney. We're not seeing that with Melbourne. We're seeing positive interstate migration in Melbourne, which typically doesn't happen. Typically people come in from overseas, move to Melbourne or Sydney, and then they go elsewhere because it's cheaper.
• 21:03
  We're seeing now more people come to Melbourne from interstate than ever before, and we're seeing a majority of that overseas migration go into Melbourne. So they're all demand factors that's absorbing that supply. In terms of the lowest amount of completions, again, two-pronged. We've seen a lot of builders go bust. The market was really soft, so not building enough homes. More builders went bust.
• 21:22
  And we've seen the cost to build a home dramatically reduce. So again, construction like the property market is secular. It goes in cycles. And when the market's super tight, builders put more margin, increase their margins, the cost of construction goes up significantly. When the market's soft, like Melbourne has been for the last really three to five years, that margin starts to reduce significantly.
• 21:42
  Those builders that still remain in the game still need to tick over their turnover, so they've reduced the cost. Because when you have five years of soft market, developers sit on sites without development. They're not releasing land or trying to unlock land. They're land banking. Now we're starting to see that potentially start to change because we're seeing probably one of the tightest markets in Australia now is in Melbourne, which those trying to get into the market is going to become more difficult. Those invested in the market, you're going to see price rises.
• 22:09
  You mentioned on the migration where people either are returning or actually now from an affordability play. We mentioned the rents there comparing Sydney to Melbourne. When you look at the long-term average in terms of interstate net migration, Melbourne's ahead of where it was. So it's actually probably breaking even for the first time, whereas previously, like Sydney, would always be losing a lot. So you get a lot of negative sentiment about Melbourne, and rightfully so sometimes with some of the crime issues and the tax issues and whatnot. But when you look at some of the core data in terms of supply and demand,
• 22:39
  So fundamentals, it is showing, you know, it's starting to appear to be some green shoots for some growth there as well. And we've already kind of seen that at the back end of last year too. Yeah, absolutely. Quite excited to see where the mobile market goes. Cool. South Australia, approvals jumped 23.7% year on year. So really, you know, probably one of the, I guess, the most positive states, I guess, in terms of approvals. But you're looking at one of the most undersupplied states, right? Like we spoke about on the podcast, Athelade's gone a serious run over the last decade. Mm-hmm.
• 23:09
  It's one of the tightest markets. Therefore, it doesn't surprise me that we're seeing that level of approval rate take place. I spoke about my concerns about the South Australian market, about the affordability problem there. I think this is the first sign of, although they're not completions, if we say the same level of...
• 23:25
  completions as we are approvals, you're going to potentially see for the first time in the last decade, potentially supply outstripped demand in the South Australian market in a market that's also facing a serious affordability issue. So then when we look at the key fundamentals of any market, supply, demand, affordability, and confidence, well, affordability, put a red cross next to that. If supply starts to outweigh demand, put a cross against both those numbers, and then confidence, that's going to be led by...
• 23:49
  job activity and obviously RBA decisions, cost of money goes up, we could start to see that market falter potentially in 2026.
• 23:57
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• 24:26
  Yeah, I mean, it's approvals as well. So you're right, it could- That's the future pipeline, right? That's 12 to 18 months. So you can clearly see a slowdown in the next 12, 18 months, but potentially, as you've mentioned on previous podcasts, that affordability ceiling that it's at at the moment- Adelaide listeners are not going to like me, which is completely fine. I've just got concerns for those that are investing in that market.
• 24:47
  Yep. All right, let's wrap it up with Queensland. Now, you know, apologies to those in Tasmania or some of the territories we didn't mention. I do get comments where we don't talk about them enough. We'll dive into them in their own podcast. I think we do a separate episode, yeah. We get a lot of comments on regionals and interstate. It'd just be too long on podcasts. People, we need to do its own. Okay, let's just touch on Queensland. Because Queensland's a fascinating one. Similar to Perth, leading the way, always leading the way kind of from an interstate. Speak to anyone in Queensland right now. That market's never going to slow down. Yeah.
• 25:15
  Anyone on the Gold Coast, how easy is this? They're making $100,000 equity in one or two months. It's fascinating to hear the commentary coming out of Queensland. It's a bit of a shotgun state, right? Like they're all going, the property prices are going to the moon. Yeah. That naturally concerns me. But yeah, continue. Sorry, Reece.
• 25:31
  So, I mean, fascinating, still super strong on migration off the back of COVID. It's pretty much on par with how it's been trending for the last four or five years. But what's interesting about Queensland is they've actually had a reform to boost foreign investment for new housing. So to try to keep up with the demand, they are using initiatives that other states are probably pretty negative on at the moment. So what's your thoughts on opening that up?
• 25:56
  Essentially what Melbourne did seven or eight years ago and how did that serve? We've seen such an oversupply of apartments, units, because you see international money typically park itself in Australia and that's such an attractive model, particularly when you look at a lot of Chinese investors, a lot of Hong Kong investors, they want to save even for their cash and that's why we see so much activity in that sort of 2015 to 2018 period. We see a lot of international money just park itself up in the Docklands, in the
• 26:25
  in South Yarra, all these markets. And you've pretty much had these buildings where, you know, two, 300 apartments where the electricity wasn't turned on for two years because there's no one living in there. They're just parking their cash there. So I've got, you know, I can see the merit behind it because it's finally looking and trying to bring on supply. And when rents are rising, you probably want to, you know, allow some of that international capital to park itself here.
• 26:50
  But from an investment lens, if I'm going to invest in a market, I'd be a little bit concerned about the future oversupply issue that may come into that market. And we've seen Queensland do this time and time again, right, where they oversaturate the market with apartments and units. We saw it in Brisbane significantly in 2016, 17 and 18, where there was such an oversupply of apartments and units that affected the Gold Coast as well. So long-term fundamentals for that market with those initiatives concern me. But from someone who's trying to get into the market through the lens of an occupier,
• 27:19
  Yeah, it's super positive from a supply solution. Lachlan, I know you're not feeling well, the flu apparently, so I'm going to hear you one last question. So you're going to need to think about this. How, on an Australian level, how do house prices stabilise? Prices don't stagnate.
• 27:35
  in the short to medium term, unless there's an international event, unless sentiment changes so significantly that it reduces the confidence of investors. And what does that look like? A COVID event, a GFC event, because the supply and demand fundamentals across pretty much every market in Australia are so outweighed in terms of demand outstripping supply and confidence is higher than it's ever been. These markets will not slow down unless there's something outside the micro markets that impacts it.
• 28:03
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