Current Demand for Homes in Australia

Rental Affordability – “How is demand for property affecting Rental Affordability?”

Based on current and forecast population growth, the requirement for 240,000 new homes in Australia, per annum is a realistic number.

It could also be the Absolute Bare Minimum requirement!

Have you noticed of late, how many media articles are talking increasing housing demand and housing supply issues?

We have!!

This most recent article, by our prime minister is not only raising Fear of Supply shortages, we look a this problem and immediately recognise an Investors dream coming true.

Why glass full approach, you may be asking?

A principal of economics is “supply and demand”, when supply is low and struggling to keep pace with demand, the price of the commodity rises.

In this case, a low supply of much needed homes, for a growing population (growing by design of the government), will result in an increase in both land cost and build costs, in property prices and in rental yields. It is not possible to stop this. A perfect storm for investors, a potential tragedy for want to be buyers to live in.

The issue of housing in Australia is shaping up to be a major political battleground between Albanese governments housing platform pledge to complete 1.2m new homes over next 5 years and the Coalition identifying a shortage of trades to help reach this goal.

Current major infrastructure projects nationwide are absorbing skilled tradespeople, exacerbating labour shortages in residential construction. There is a need for 90,000 tradespeople withing the next 3 months alone! A projected shortfall across Australia of 590,000 to 680,000 individuals needed for this target.

Current Supply

Historically, the highest number of dwelling completions achieved over a 12 month rolling period occurred in March quarter of 2017 with only 223,600 recorded.

7 years ago, meaning over the past 7 years builders have been unable to meet the required 240,000 new dwellings, per year, over the next 5 years. Falling short by an astounding 16,400 new dwellings per annum.

Market issues that will impede supply include :

• Land availability and Land Release by local government and councils
• Insufficient staff in government and council to approve land release
• Insufficient staff in councils to approve build contracts, that is a staggering 20,000 per month
  • Current trend is only 15,000 monthly approvals
  • Year 2024 dropped to 13,000
• Low supply of Trades People to employ to build the dwellings
• Government Infrastructure Projects attracting Trades who are chasing higher wages and more comfortable employment contracts, limiting supply of these same trades to the local building industry
• High Interest rates impacting Developers who do want to build both Units and or Develop Land, delaying delivery of projects to want to be buyers. Banks simply do not lend as freely as they did. Private lending makes borrowing that much more expensive for developers
• Delays by Developers increase their holding costs of the Land they own, these costs are then passed onto buyers like you. Meaning any delay is inflationary
• High interest rates means borrowers like yourself will incur high Holding Costs, whilst your project is being built impacting your own cash flow and affordability to build
• High interest rates means borrowers like yourself can only borrow less than when interest rates were lower
• Federal Treasury forecast in the budget that dwelling investment is expected to remain flat across 2024-25 financial year
• An ageing population and Australians having fewer children, the changing demographics of households, will continue to put upward pressure on demand for housing
• Australia enjoyed a net overseas migration adding 548,000 people to the population in the year to September, underscoring the need for more dwellings. Why has this same government failed to include tradespeople in the list of skilled migrants, failing to align policy with industry needs? Where is the streamlining pathway for skilled workers essential to the construction industry?

Drastic need to collaborate to overcome barriers and expedite the approvals process, whilst addressing workforce shortages.

PropTrack senior data analyst summary

Home Industry of Australia

HIA chief economist, Tim Reardon, estimates that only 176,000 new homes will be completed during the next 12 months. Actual completions will continue to under perform the target of 240,000, to varying degrees over the course of the 5 year election pledge.

Albanese pledge 1,200,000 new dwellings

Based on current industry performance, only 1,013,000 may be built.

This is a massive shortfall of 37,400 per annum or 187,000 dwellings over 5 years!

Since ABS records began for overall dwelling completions in the mid 1980’s, middle ground estimates demonstrate an oversell by government, with a peak of 227,300 homes.

Achieving an all time high record target, in times of current market issues is unrealistic to state the obvious. This means 17,000 more dwellings required is a massive and unrealistic ask.

Contextually speaking, the construction sector is struggling with the building cycle, high costs and highest interest rates in over a decade. Making Albanese wishes an incredibly ardent mountain to scale.

Compound this with historical dwelling approvals taking 6 to 9 months under normal conditions to be approved.

Compound this with the insufficient workforce available to meet these ambitious targets.

An ageing population and Australians having fewer children, the changing demographics of households, will continue to put upward pressure on demand for housing

Inflationary, price of property will continue to increase

Rental Affordability hits record Low !

Rental Vacancy Rates continue on historical trend at 1% and even lower in some locations. Demand for rentals increase due to affordability to purchase and population growth. Limited to no relief for renters in coming years, with median advertised rents rising above 11.5% during 2023/24 a staggering pace of rental yield growth. Signs pointing to continuing pressured market on lack of supply. Investors continue to deliberate on whether to hold onto their investment properties or to sell them, due to high interest rates and holding costs. This trend will place upward pressure on supply of Rentals.

Rental Affordability remains the worst ever seen in Australian history, since rental data records have been kept.