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Housing Market - Supply & Demand

Supply and affordability challenges ahead for Australia’s housing market

Demand is expected to outstrip supply by tens of thousands of homes each year.

A new report from the government’s National Housing Finance and Investment Corporation (NHFIC) has forecasted that the demand for housing could outpace supply by an average of 20,400 homes each year beginning in 2025.

The NHFIC’s latest modelling suggests that the supply of new housing will exceed demand from new households by 115,300 this year and 35,500 next year due to the impacts of the pandemic.

Australia’s economic recovery and a return of net overseas migration to pre-pandemic levels are then expected to drive the shift to a supply shortfall of 163,400 dwellings in total between 2025 and 2032.

While over 550,000 net new dwellings are set to be constructed over the next three years, NHFIC warned that the time taken between development application and construction completion constrains the property industry’s ability to meet future demands.

“Given it can take more than six years to get new housing supply to market in some areas, pulling back on development decisions now will exacerbate affordability problems in future years when population growth is expected to return to more normal levels,” NHFIC said.

“If housing authorities actively slow or impede the flow of new housing supply, it can exacerbate upward pressure on rents and prices, something that should be avoided if improved housing affordability is a primary objective.”

In contrast, if housing supply exceeds new household formation in the coming years, NHFIC said that this could put downward pressure on house prices.

NHFIC found that first home buyers are now required to save for an extra year to secure a 20 per cent deposit on a home compared to last year.

The time required to save for a deposit has doubled from four years in the early 1990s to eight years today, while the size of the deposit is nearly five times higher at close to $130,000.

“Housing affordability for first home buyers was already highly challenged, but has deteriorated further over the last year across many cities and regional areas, on the back of strongly rising house prices,” said NHFIC.

“First home buyer participation in the market was high over the last year, on the back of monetary and fiscal stimulus, but is now declining.”

Nationally, about 30 per cent of properties are affordable to middle-income first home buyers, down from 40 per cent a year ago.

Affordability is currently worst in Sydney and Hobart, where the bottom 60 per cent of income earners can afford less than 10 per cent of the properties available, while affordability has also deteriorated in the regional areas of NSW, Victoria and Tasmania.

“It has been a remarkable past 18 months for Australia’s housing markets, with the largest population shock in a century, unprecedented government stimulus, a widespread flight to the regions, and accelerating house price growth and tightening rental markets impacting housing affordability,” said NHFIC CEO Nathan Dal Bon.

“This research has been informed by extensive consultation with stakeholders including industry and provides on-the-ground insights to understand Australia’s housing supply and affordability trends in the coming decade.”

Source  :  https://www.nestegg.com.au/invest-money/property/supply-and-affordability-challenges-ahead-for-australia-s-housing-market?utm_source=Nestegg&utm_campaign=28_02_22&utm_medium=email&utm_content=1&utm_emailID=2a5685251cba324cf55dd8a8a989e61829f0af3b973dc21c990827de1fbf7043

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