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.

The Centennial Collection, the new apartment development on the edge of Centennial Park in Bondi Junction, continues to break local residential property records.

A local Eastern suburbs buyer has splashed $11 million on a three-bedroom, sub-penthouse on level 10 of the development, topping the previous record within the same development.

At 266 sqm, including internal and external space, the north-facing residence achieved more than $55,000 per sqm, making it one of the most expensive apartment transactions ever recorded in Sydney’s eastern suburbs outside the harbourfront enclaves of Double Bay and Darling Point.

The buyer had originally purchased a three-bedroom apartment in The Centennial Collection in 2025 for $6.5 million before deciding to secure the larger half-floor sub-penthouse.

Ray White Projects Director of Sales Marcello Bo, who is managing sales for the project, said the transaction highlighted the continued strength of demand for premium apartments in Sydney’s eastern suburbs.

“This sale is a clear indication of buoyancy in the upper end of the market and reinforces the strong demand and appetite for primely located, larger-sized apartments with all the luxurious inclusions you would expect with a development of this calibre,” Bo said.

“It also demonstrates that superbly-designed, lifestyle-driven residences in tightly held locations continue to outperform, particularly when they deliver scale, privacy, rarity and long-term liveability that aligns with how buyers want to live today.”

The Centennial Collection occupies a prominent gateway site overlooking Centennial Park at the junction of Bondi Junction, Woollahra and Paddington. Following recent State Significant Development approval, the project now comprises 79 apartments across two adjoining towers rising 13 and 16 storeys.

The development has been designed to target owner-occupiers seeking larger-format apartments, with residences featuring inclusions more commonly associated with standalone homes, including private rooftop pools, bedroom fireplaces, wet bars, butler’s pantries and full-sized wine fridges.

The record-setting residence was originally designed as one of the project’s penthouses before the approval process allowed additional levels to be added to the scheme.

Positioned on Level 10, the apartment occupies half a floor and has no common walls. It offers 270-degree views spanning Sydney Harbour, the Harbour Bridge, Opera House, Centennial Park and both the northern and southern headlands.

The purchaser said that proximity to Centennial Park, transport connectivity, and the surrounding lifestyle amenities ultimately drove his decision.

“I’m constantly looking at developments everywhere in the east, from Darling Point to Rushcutters Bay, Double Bay, all the beaches, Bondi, Bronte, Tamarama, Woollahra. I wanted something new,” he said.

“Everywhere you go, there’s a trade-off. It might have a great floor plan, but it doesn’t have a view. Working in the city, your daily commute impacts everything, so Bondi Junction train station was a huge factor in my decision.”

The buyer, an avid cyclist who rides regularly in Centennial Park, said his view of the location changed significantly as he spent more time assessing the eastern suburbs market.

“At first, I thought, who would want to live there? It’s one of the busiest intersections in the eastern suburbs. But when you peel it all back, it’s one of the best locations in Sydney. You’re close to everything, you can walk to everything, the amenity is incredible, and the views are amazing.”

Bondi Junction is slated to look materially different in the coming decades, with a draft 100-page masterplan proposing a regeneration of the suburb which would include thousands more apartments as well as a revitalised commercial, retail, and dining precinct.

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.

A record-breaking $11 million sale at The Centennial Collection has set a new benchmark for luxury apartment living in Bondi Junction.