The gap between housing demand and supply has grown according to the National Housing Supply Council to 186,800 homes.
That shortfall is predicted to blow out to 640,000 within 20 years.
In terms of number, New South Wales and Queensland have the biggest shortfalls, while relative to the size of its market, the Northern Territory is on top.
What does this all mean? It indicates that housing production needs to rise well above trend to reduce further housing shortages in the future and worsen housing affordability.
The European debt crisis has seen investor confidence wane in Australia, with home building approvals down around 30 per cent in October from a year earlier.
The Reserve Bank has already cut the official cash rate twice at the end of this year, and that’s likely to be followed with some further monetary policy easing next year.
The big banks though, have already indicated they won’t necessarily follow any RBA cut, but given one of the Reserve’s responsibilities is to keep mortgages in check, it’s likely the board may keep slashing rates if the banks don’t pass on those savings to borrowers.