Director of Metropole Property Strategists Michael Yardney warns there is a “fundamental mismatch” between the cost of building new homes and the price it attracts for developers.

He told 9news.com.au this has resulted in a major housing shortage, which has in turn driven up prices across the board.

To fix this, Yardney said property prices need to skyrocket even more.

“Most large-scale developers reckon that prices have to rise 15-20 per cent to make taking on the risk of developing new projects viable,” Yardney said.

“This isn’t just about greed; it’s about sustainability. 

“If prices continue to stagnate – or worse, fall – then the incentive to build diminishes, further exacerbating the shortage.”

Over the past 25 years, the median house value nationally has risen by 412 per cent, or $459,900, figures from Aussie Home Loans reveal.

And according to the latest figures released by the ABS, the average price of homes in Australia is now a staggering $976,800.

Yardney warned there is “no way around” this tough solution, which may come as unwelcome news to those trying to crack into the property market.

His prediction is the property housing crisis will get a lot worse before it gets better.

“It’s a tough pill to swallow but think of it as a short-term pain for long-term gain,” Yardney added.

“We might just find that the path to solving our housing crisis lies in facing up to the unpopular truths we’ve been reluctant to acknowledge.”

Australia is drastically falling short providing enough housing for our growing population.

Current projections show the industry is missing the mark by around 300,000 homes over the next five years. 

Metricon Homes chief executive Brad Duggan said the federal government needs to enact a  “wartime response” to address this crisis.

“A dynamic, robust intervention reminiscent of measures typically reserved for national emergencies,” he said.

“Developers tell us that if we truly see this as a crisis, we should address it with immediate solutions like cutting through the planning process blockages.”