Australia needs to build more than twice as many apartments a year to accommodate a rapidly growing population and address the country's rental and housing affordability crisis, new analysis says.
Property consultancy Charter Keck Kramer predicts Australia will need to complete 72,000 to 78,000 apartments each year to meet ambitious housing construction targets agreed by state and federal governments. It became clear that there was a need.
This estimate is a significant increase from Australia's current efforts, which see just 26,800 homes built during the 2022-23 financial year.
Earlier this year, policymakers set a goal of building 1.2 million new homes across the country over the next five years to alleviate the country's rental crisis and address housing affordability challenges.
Australia will also need to build additional townhouses and housing, but new apartments will help provide rental supply at the scale and speed needed.
The rental crisis has worsened this year, with the national rental vacancy rate dropping 0.06 percentage points (ppt) month-on-month in October to a record low of 1.02%, according to the latest data from Prop Track.
Anne Flaherty, senior economist at PropTrack, said tenants faced an even tougher situation last month, with the proportion of rental properties remaining vacant reaching record lows.
Building so many new apartments may be unreasonable for an industry already facing severe labor shortages. By way of background, the homebuilder completed a record 64,400 new apartment units during his 2017 fiscal year.
Mid-rise apartment developments of two to six stories are essential, said Richard Temlett, national executive director of research and strategy at Charter Keck Kramer.
The consultancy estimates that of the 156,000 apartments that have already received planning permission, around a third are in mid-rise projects located in the inner and middle rings of the capital.
![](data:image/svg+xml,%3Csvg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 800 450"%3E%3C/svg%3E)
Mid-rise apartment buildings are key to providing more apartments near existing infrastructure.Photo: Getty
Importantly, these mid-rise apartment projects have the potential to be built in and around existing infrastructure, rather than 'greenfield estates' that require expensive new roads, water and power connections.
Rental apartment under construction
A number of build-to-rent (BTR) apartment buildings are scheduled to open next year, and there is a growing demand for more units.
Mirvac last week “completed” the new Liv Aston BTR apartment building in Melbourne. This is a milestone stage in the construction of the new building, which will offer 474 rental apartments when it opens next year.
“The recent establishment and capitalization of our new build rental business increases our exposure to the rental housing sector, expands our portfolio in the medium term and strengthens our commitment to play a key role in addressing housing and rental issues. It confirms the vision, which is lacking in Australia,'' Mirvac Group CEO Campbell Hannan said.
BTR's developer and operator, Local Residential, also recently completed a new development in Kensington, with plans to deliver 477 rental units next year.
“At a time when we are facing a housing crisis, Melbourne desperately needs more quality homes in well-connected communities that provide housing security for tenants.”Local Founder and Co-Chief Executive Managing Director Matt Berg said.
Other BTR developers and operators such as Home, Greystar, Salta, Pellicano and Hallmarc are also working on and delivering projects across the country.
Mr Temlett said that while a large number of BTR apartments will be built over the next few years, it remains difficult for many developers to obtain the necessary construction funds to start construction.
Local Residential's new new rental building in Melbourne's Kensington will open next year.Photo: Local
“There are a lot of well-capitalized development companies like Home, Garner and Mirvac who have the balance sheets to stay afloat and are willing to provide equity into an undersupplied market,” Temlett said.
“They're likely to catch on quickly and see strong rental growth because we don't have a lot of supply right now and we're facing a massive rental crisis.”
Australia's emerging BTR sector is expected to have around 55,000 rental apartments completed by 2030, according to Knight Frank.
