HIA predicts acute home shortage

Australia's population growth in 2007 exceeded 330 thousand. If this is maintained for the next five years, population will increase by more than 1.65 million. How many new homes are required to house these people?
Read the following quote from the Housing Industry Association, released on 2 July.
"HIA research identifies the requirement for an additional one million homes to be built in Australia over the next five years to plug the underlying demand gap. The renewed weakness in 2008 for leading indicators such as building approvals highlights the lack of progress in boosting production to begin reducing the acute housing shortage"
One million homes over five years is 16,667 homes every month. Is this achievable? See the graph below.

The graph shows that building approvals have reached the required level of almost 17,000 per month only for very short intervals at the height of the property booms. To reach the HIA's target of 1 million homes over five years, the level of approvals (now about 13,000 per month) would need to rise immediately by almost 30% to its historical peak, and then be sustained at this historical peak level every single month for the next 60 months!
Unless this happens (and clearly it won't) excess demand will persist.
This is why rents are forecast to rise strongly.
Property prices are also forecast to rise strongly by respected economic forecasters such as BIS Shrapnel (see recent FCC Bulletin), especially in regions where excess demand exists and is expected to continue, such as Sydney and Queensland's Gold Coast and Sunshine Coast.
However, right now sentiment has been damaged by a weak stock market, high interest rates, slowing US economy, and some financial instability arising from the US sub prime crisis. In reality, the economic fundamentals for Australia are sound-growth is solid and unemployment is low, driven by strong growth in Asia, particularly China and India; inflation and interest rates are at or near their peak; the Australian financial institutions are sound; and there is excess demand for housing that will only increase.
It is typical for sentiment to be out of line with economic fundamentals. This is why we see booms and crashes in the equity markets. However, eventually economic fundamentals prevail, as they always do, and for a property market facing sustained and increasing excess demand, and long lead times to increase supply, the alignment between sentiment and fundamentals might well coincide with falling interest rates.
In the meantime, for astute investors prepared to take a medium term view (which we advocate), there is an opporunity to acquire quality properties at prices and on terms that are unlikely to be available when sentiment aligns with the economic fundamentals.
We have taken advantage of the current imbalance between fundamentals and sentiment to secure access to a range of excellent properties in strong areas at good price points and good yield