The National Housing Finance and Investment Corporation (NHFIC) has cautioned that the housing crisis in Australia will persist for the foreseeable future.
In its research report titled State of the Nation’s Housing 2022-23, released on Monday, NHFIC identified post-pandemic population growth and continuing interest rate increases as the primary causes of the persistent housing shortage and affordability challenges.
Slowing supply, together with increasing household formation is expected to lead to a supply household formation balance of around -106,300 dwellings (cumulative) over the 5 years to 2027 (and around -79,300 dwellings over the projection period 2023 to 2033).
It comes at the same time as new numbers from the Australian Bureau of Statistics (ABS) for lending and building approvals.
The total number of dwellings approved rose 4 per cent in February, in seasonally adjusted terms, following a 27.1 per cent fall in January, according to data released on Monday by the ABS.
ABS Head of Construction Statistics Daniel Rossi said dwelling approvals have continued their downward trend since September 2022 following the conclusion of government stimulus and rising interest rates.
At the same time the value of new loan commitments for housing fell 0.9 per cent to $22.6 billion in February 2023 (seasonally adjusted), after a revised fall of 2.4 per cent in January.
The total value of loan commitments has fallen 33 per cent since reaching record highs in January 2022.
NHFIC expects around 148,500 new dwellings (net of demolitions) to be delivered in 2022-23, before net new construction falls to 127,500 in 2024-25. A recovery in supply is expected after 2025-26 on the back of changing macroeconomic conditions and stronger underlying demand.
From 2023 to 2032, household formation is expected to be dominated by lone person households (563,600 additional households), followed by couples with children households (533,300 additional households). Within 5 years, it is expected lone person households will be the fastest growing household type across the country.
NHFIC continues to expect a shortage of apartments and multi-density dwellings for rent over the medium-term. Net additions of apartments and medium-density dwellings such as town houses are projected to be around 57,000 a year (on average) over the 5 years to 2026-27, around 40% less than the levels seen in the late 2010s.
Property Council Chief Executive Mike Zorbas said this emerging 79,300 home deficit is a grim warning.
“It reminds us that state, territory and local governments simply have to lift their run rates on housing supply across the at market, key worker and social housing spectrum.
“We also need to urgently move the housing needle by creating the right investment conditions for new build-to-rent housing, purpose-built student accommodation and retirement living communities.
“We need this for our existing population and to continue to attract the skilled migrants and students who support our education sector and bridge the huge gaps in our mining, construction agricultural and retail workforces nationally,” he said.
According to the NHFIC forecast, Brisbane will experience a shortage of 12,300 homes within the next five years, while Sydney will face a shortfall of over 10,000 homes. The largest gap is anticipated in Perth, where there is predicted to be a shortfall of 25,200 homes by 2027.
The report notes that build-to-rent provides opportunities for institutional investors to invest in rental housing.
But the time taken for development approvals in New South Wales has extended over the past couple of years.
Industry noted that the planning pathways for these projects in NSW is at least 12 months, more than double the time in Queensland and Victoria.
Mr Zorbas said the analysis also provides more reason to urgently revive and support the passage of the Australian Government’s legislative agenda on housing, including the Housing Australian Future Fund and the innovative new National Housing Supply and Affordability Council.
“All parties in the Senate also need to give fair consideration to passing the Australian Government’s housing bills, which will boost social and key worker housing around the country,” Mr Zorbas said.