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The Apartment Shortage

Keaton Jenner and Peter Tulip
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Keaton Jenner: Reserve Bank of Australia
Peter Tulip: Reserve Bank of Australia

RBA Research Discussion Papers from 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.

Keywords: housing prices; apartments; zoning; land use (search for similar items in EconPapers)
JEL-codes: R31 R38 R52 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-ure
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