SYDNEY, May 16 (Reuters) - Australia's central bank warned on Thursday there was no quick fix to the country's housing shortage, which is pushing up prices and rents and adding to inflationary pressures.
In a speech on the housing sector, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said there were signs that builders were considering new projects given the strength of underlying demand, but high costs for products and labour were holding them back.
"Demand pressure, and so upward pressure on rents and prices, will remain until new supply comes online," said Hunter, who heads the central bank's economics unit.
"We expect this response to take some time to materialise, given the current level of new dwelling approvals and the information from liaison that many projects are still not viable," she added. "In the meantime, we expect residential construction activity to remain relatively subdued."
House prices rose about 9% in capital cities in 2023 and priced many new buyers out of the market. Rents have surged as vacancy rates fell to all-time lows and strong migration flows swelled the population.
Yet approvals to build new homes have fallen over the past year amid high building costs and a shortage of specialist workers.
Pandemic-related supply chain disruptions and competition for resources from other types of construction had pushed up the cost of building a home by 40% since 2019, and these costs were unlikely to fall back significantly, said Hunter.
"An easing in zoning and planning restrictions and a streamlining of the approval process can reduce these costs, and all other things equal these changes would improve project viability and increase supply over time," said Hunter.
Some state governments are trying to ease restrictions, particularly for apartment blocks, but in many areas are meeting resistance from local councils and home owners.
Hunter dismissed talk that high interest rates were pushing up rents, saying there was little or no evidence of such a correlation. The central bank has lifted rates to a 12-year peak of 4.35% in order to curb inflation. (Reporting by Wayne Cole; Editing by Sonali Paul)
