Australia's Housing Crisis: Who's Saying What and What it Means for the Future
Australia's Housing Crisis: Who's Saying What and What it Means for the Future
It is now common knowledge that Australia is facing a chronic and increasing shortage of housing. Economists claim that if there is not a sudden and drastic increase in the number of new and affordable housing produced, the shortage could become an ingrained socio-economic predicament. The Housing Industry Association estimates that the backlog has reached almost 200,000 homes and that this number will only continue to grow in the years ahead. The latest HIA Report Card claims that while federal stimulus measures like the increase in the first home owners grant and reductions on stamp duty have stimulated a slight increase in the production of new homes, the recent scaling back of these incentives has again meant a decline in production. Dr Harley Dale, Chief Economist at the HIA has said that 'the fact remains we are not building enough homes to match demand and going forward, our nation's housing shortage is expected to worsen.'
Nowhere is the shortage more apparent than in places like the inner city and eastern suburbs of Sydney and it is here that the rental war rages with illegal rental auctions and routine offers of rent paid up front for the right apartment. Ewan Morton, managing director of real estate company Morton & Morton, said his firm had recently sent staff to inspect a property in Bondi and discovered five people living in a one-bedroom apartment. This kind of desperation highlights the difficulty that people are facing in the rental market and the extremes that they are going to, only highlight how exclusive the buyer's market has become.
This is because we are building substantially fewer homes than are required.
Goldmand Sachs' Chief Economist, Tim Toohey has detailed the extent of the shortage in his 70 page report titled 'A Study on Australian Housing: Uniquely Positioned or in a Bubble.' Toohey argues that Australia is definitely facing a chronic undersupply of housing. He claims that our population is growing faster than it has since 1969 (rising by 2.1 percent year on year) This rising rate is due in-part to an incline in births but more importantly it is because of a rise in net migration which accounts for two thirds of migration growth. According to the Goldman Sachs report, the shortage is due to reach 250,000 by the end of 2012 and the HIA claims that the shortage will hit almost half a million by 2020.
The aging population and changing demographics of society is another factor to consider when looking at the housing shortage. Households with residents aged over 65 years are projected to double from 1.6 million to 3.2 million households over the next two decades, indicating the increased need for dwelling types better suited to older people. What's more, the increase in people aged 85 years and over is said to quadruple in the next twenty years. Advances in medical technologies means that the aging population is more inclined to stay in their own homes as opposed to moving into to aged care facilities, as has been the trend in the past. This means that fewer homes are being passed onto the open market and as land becomes a rarity, especially in densely populated capitals, new generations of homebuyers are finding it more and more difficult to get into the buyer's market.
Additionally, there has been an increase in the 25-29 age group- the children of the baby boomers- who are entering into the key household formation age. The rise in this group of 3.7 percent per in this year alone, means that there is going to be greater demand on the buyer's market as people of this age aim to get out of rental properties and into their own homes.
The shortage is being felt nationwide with the HIA report stating that housing shortages exist in 295 of Australia's 669 local government areas with the majority of the shortages to be found in and around metropolitan Sydney and Brisbane. While both New South Wales and Queensland face the biggest problems, NSW is by far the worst hit by the shortage with only 20 percent of a home built for every new person.
Ben Phillips, Senior Economist at HIA has said that there are several restrictions preventing the construction of new dwellings including planning restrictions, higher taxation on new housing as well as labour shortages.
Harley Dale from HIA has said that 'renewed weakness in new homes starts in 2011 would mean that there were only two years in ten when starts have risen. That is an appalling result, which highlights the challenge Australia faces in addressing a large and growing housing shortage that will place considerable further pressure on rental markets'.
The National Housing Supply Council's State of Supply Report 2010 found that previous housing demand projections have been underestimated with underlying demand growing by an estimated 205,900 households in 2008-09. Additionally, the NHSC claims to have miscalculated how many dwelling would be constructed in the last few years, indicating that there was scope for 176,000 dwellings a year to be built in 2009 and 2010 but that the reality is that there were significantly fewer dwellings constructed.
The NHSC lists the global financial crisis as a significant contributor on the impact of decreased dwelling completions rates and their report details how the GFC will continue to affect these rates for the years to come. Like the HIA Report Card, the NHSC Supply Report has praised the government's stimulus packages including major investment in social housing and the first home owners boost which has mitigated some of the impact of the GFC but insist that the outlook is still dire with the medium projection of underlying demand sitting at 3.2 million additional households in the twenty years to 2029.
It is the problematic combination of several factors that has seen the Australian housing market reach crisis levels. Population increases coupled with factors like higher interest rates, labour shortages, lags in completion rates of new dwellings, infrastructure delays as well as demographic changes which has resulted a market struggling to keep up with increasing demand. The basic principles of supply and demand indicate that if the Australia property market carries on this path, houses will continue to be a rarity and will prices will continue to rise. The shortage is forcing people to rent longer, pushing rental prices up which is obviously good news for those already in the investment market. But for those who are yet to buy their own home, the moral to the story is start saving for your home today and if you have already done that, do not lose the momentum. Broome's Mango Festival Ten Classic Christmas Toys for Boys Some Merry Facts About Christmas In Dubai Every Tourist Wants Rental Villas In Cannes. What Is the Best Gift for Christmas 2010? Exotic Rajasthan Tour For Enjoying The Natural Beauty Of India Year Round Christmas And A Prayerful Spirit! N Dubz Tickets Tour Nationwide Braces Colorado Springs Luxury Travel Brand Black Tomato Partners Up With Uniqlo Christmas Gift Ideas - 21 Solutions for a Better Holiday Season Enjoy A Memorable Trip To India With Golden Triangle Tour Packages Fannie Mae Suspends Foreclosure Evictions In Time For The Holidays