WHY THE HOUSING CRISIS IS ABOUT TO GET MUCH WORSE

The Reserve Bank had little choice but to raise interest rates again this week.

Inflation was already proving stubborn before the latest Middle East instability added further pressure to energy prices and supply chains.

Housing inflation alone has averaged six per cent over the past year, remaining one of the single biggest contributors to CPI.

But while the focus remains on rates, the deeper problem is structural and far more dangerous.

Australia is not building enough homes, and the conditions required to fix that are deteriorating simultaneously.

Construction costs remain elevated. Builders are increasingly unwilling to absorb contract risk. Labour shortages persist.

Capital is becoming more expensive. And as borrowing capacity weakens and sentiment softens, fewer projects are becoming financially viable.

The result is a self-reinforcing cycle.

The RBA raises rates to fight inflation. Higher rates reduce development feasibility. Fewer projects start. Housing supply tightens further. Rents rise. Inflation persists. The RBA raises rates again.

The only long-term solution is supply, yet Australia remains nowhere near the National Housing Accord target of 240,000 new dwellings a year.

Completion continues to lag approvals, meaning many projects approved on paper are simply never making it out of the ground.

That gap matters enormously because housing is not just another sector of the economy.

Around two-thirds of Australian household wealth is tied to property, while the sector underpins millions of jobs and related industries. Weakness here quickly spreads beyond real estate.

We are already seeing signs of stress. Auction clearance rates in Sydney and Melbourne have softened, borrowing capacity has declined, and parts of the market are experiencing price corrections as confidence weakens.

At the same time, policymakers continue to debate tax measures such as changes to negative gearing and capital gains tax discounts, despite fears that such reforms could drive private capital out of the rental market at precisely the moment when supply is most constrained.

This is the paradox at the centre of Australia’s housing crisis.

Demand for property remains extraordinarily high, yet the economic conditions required to actually build new housing are worsening.

The Reserve Bank cannot solve that problem alone.

Monetary policy cannot accelerate planning approvals, reduce construction costs or create more tradies. It can only raise the cost of money until something eventually breaks.

And increasingly, that “something” looks like the development pipeline itself.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

A bold architectural statement in Melbourne’s inner east, this unique Glen Iris home marries sculptural design with sophisticated family living in a remarkable real estate relationship.

Conceived by Pandolfini Architects, with interiors by Lisa Buxton, the custom-built four-bedroom, two-level home was crafted for its current owners but is now coming to market for the first time.

Listed via an expressions-of-interest campaign with Marshall White agents Rae and Hugh Tomlinson and Mandy Zhu, 8 Erica Ave is on the market with price expectations of $7.5 million to $8 million.

Its dramatic street appeal sets the tone for what’s to come, because beyond the contemporary façade sits a modern residence unlike any other.

Pandolfini’s team brief was to create an inviting home made from hard-wearing materials, with a palette inspired by ancient ruins and old industrial buildings.

The result is striking, cantilevered terracotta brickwork and a patinated copper-screened exterior that borrows hues from the classic neighbouring cottages.

One within the home, the Erica Ave property unfolds across three interconnected pavilions positioned along the deep block. Long gallery hallways are framed by floor-to-ceiling glass to showcase garden and pool views, making the most of the 886 sq m site.

Raw, heavily textured walls create an industrial aesthetic inside and out, while curious “upside-down” arched windows introduce a creative architectural twist.

At the heart of the home, the central living and dining zone is divided by a sculptural fireplace rendered in hard plaster. High barn-style spotted gum timber ceilings rise above bush-hammered concrete walls with Roman travertine floors, and American oak joinery.

In the marble kitchen, there are premium Wolf and Miele appliances, a butler’s pantry, an integrated study nook, and a bespoke curved window that wraps around a custom-made banquette dining space.

Walls of glass frame the north-facing terrace where a heated swimming pool and spa are enveloped by private landscaped gardens with an integrated barbecue setting.

Within the front pavilion, the large parents’ retreat features built-in and walk-in wardrobes, a dresser, and a travertine ensuite with a freestanding bathtub, rain shower, and a dual-marble vanity. Also on the ground floor is a second bedroom and a media room with a built-in daybed and a picture window overlooking the yard.

One floor up via the curved staircase with skylight, there are two more bedrooms with terrazzo bathrooms, study spaces, and leafy outlooks.

Car enthusiasts not only have a single lock-up garage on Erica Ave, but an additional rear showroom-style five-car pavilion or grand studio accessed via Irymple Ave. It has a high vaulted ceiling, a concealed in-floor Maha car lift, a workbench, and a sink.

Added extras include a mud room, laundry with side access, in-floor heating and climate control within the engineered European oak floors, deluxe joinery, and CCTV security.

The Glen Iris home is within walking distance of Central Park Village, Harold Holt Swim Centre, and Gardiner Station, as well as popular schools including Sacré Cœur, Korowa, and Caulfield Grammar.

The Pandolfini-designed house at 8 Erica Ave, Glen Iris is listed with Marshall White for $7.5 million to $8 million via an expressions of interest campaign.

WHY THE HOUSING CRISIS IS ABOUT TO GET MUCH WORSE

Rising rates, construction inflation and shrinking investor confidence are pushing Australia deeper into a dangerous housing spiral that monetary policy alone cannot fix.

Crafted by Pandolfini Architects with interiors by Lisa Buxton, the Glen Iris residence pairs industrial-inspired design with refined contemporary living and a five-car showroom pavilion.