A new report on the state of the nation’s housing market has put state governments on notice and highlights an urgent need to address severe shortages in housing supply.
The National Housing Finance and Investment Corporation’s latest State of the Nation’s Housing report analyses housing demand and supply across Australia, and makes long-term projections to identify potential drivers and challenges for housing affordability.
NHFIC CEO Nathan Dal Bon notes the last 18 months have presented 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”.
Among the key findings, more than 1.7 million new households are expected to form across Australia from 2022 to 2032.
By household type, the strongest growth in new households is expected from lone person households (595,000), followed by couple families without children (488,000), then couple families with children (361,000).
On the back of record low interest rates, combined with state and federal government stimulus, new housing supply is expected to be stronger than NHFIC anticipated in its 2020 report and will likely remain strong by historical standards over the medium term. More than 550,000 new dwellings are expected to be constructed – 184,000 per year – over the next three years.
While housing supply may appear healthy in the short term, there is in fact a major supply crunch on the horizon, according to the Property Council.
Ken Morrison, Property Council chief executive, says the report shows that as the economy and Net Overseas Migration recovers, the demand for new households will outstrip supply.
“The projections in this report are concerning and mirror the same warnings the Property Council has been making for some time,” Morrison says.
“The report clearly shows that between 2025 to 2032, Australia will find itself 163,400 homes short of expected demand. That’s an average deficit of 20,000 homes a year, every year, until 2032.”
Overall housing supply is expected to fall by around one third in just four years from 2023. “That can’t be good for housing affordability,” Morrison adds.
The report also highlights significant greenfield land supply constraint in key markets including Sydney and South East Queensland, which could limit the industry’s ability to meet demand.
“The report rightly draws attention to the importance of lag times in its predictions, noting it can take more than six years to get new housing to market in certain jurisdictions.
“At a time when housing affordability is front of mind for some many Australians, the last thing we can afford is having supply and planning constraints putting further upward pressure on rents and prices,” Morrison concludes.
The Property Council will continue to urge governments of all levels to take immediate steps to address the major concerns flagged in NHFIC’s report.
Download State of the Nation’s Housing report.