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The Apartment Shortage

Author

Listed:
  • Keaton Jenner

    (Reserve Bank of Australia)

  • Peter Tulip

    (Reserve Bank of Australia)

Abstract

This paper measures the excess demand for apartments in Australia's largest cities. We estimate that home buyers will pay an average of $873,000 for a new apartment in Sydney though it only costs $519,000 to supply, a gap of $355,000 (68 per cent of costs). There are smaller gaps of $97,000 (20 per cent of costs) in Melbourne and $10,000 (2 per cent of costs) in Brisbane. The large gaps are sustained by planning restrictions. The shortage of apartments is most severe in the inner suburbs of Sydney, where height limits prevent more construction. Elsewhere, restrictions on converting low-density housing to apartments are important. High-rise apartments are a much less costly means of supplying extra housing than the medium-density housing that some planners favour.

Suggested Citation

  • Keaton Jenner & Peter Tulip, 2020. "The Apartment Shortage," RBA Research Discussion Papers rdp2020-04, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2020-04
    DOI: 10.47688/rdp2020-04
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    References listed on IDEAS

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    More about this item

    Keywords

    housing prices; apartments; zoning; land use;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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