Residz Team 3 min read
You know this but now it’s official. If you’re in the bottom 60% of income earners you’re able to afford less than 10% of available properties in the Sydney and Hobart markets.
This is just one finding in the The National Housing Finance and Investment Corporation (NHFIC) ‘State of the Nation’s Housing 2021–22’ research report. As homeowners in Sydney made more than a CEO did last year, the report shows first home buyer affordability deteriorated over the course of 2021 in a “remarkable 18 months” for Australia’s housing markets.
The report provides analysis into housing demand and supply across Australia, as well as long-term projections, with a view to identifying potential drivers of, and challenges to, housing affordability.
In its press release, NHFIC CEO Nathan Dal Bon said: “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 [have been] impacting housing affordability.”
Despite experts being divided on home sales growing or stalling in 2022, and talk of house prices falling in 2023 the report shows affordability may not improve much in the medium term.
While it expects more than 184,000 new dwellings (net of demolitions) to be constructed on average each year over the next three years, demand is again expected to outstrip new supply from 2024-25.
This is because Net Overseas Migration (NOM) will recover, helping to grow the number of households and outpacing the number of homes being built to accommodate them.
More than 1.7 million new households are expected to form across Australia from 2022 to 2032, the report predicts. It says that by household type, most will be ‘lone person households’ (595,000), followed by couple families without children (488,000), then couple families with children (361,000).
A key finding in the report is that a shortage of multi-unit dwelling completions is expected in the next 2 to 3 years, especially with rental markets tightening, and demand lifting as international border restrictions are relaxed. It predicts more higher density dwellings will be required closer to CBDs to meet unmet demand.
The Property Council of Australia says the fresh NHFIC data also correlates with Property Council/Urbis data, which showed apartment supply in 2020-2024 is likely to be around just one fifth of levels we saw in 2014-2018.
It may be costly to build them. The State of the Nation’s Housing report’s key finding on building costs shows that supply constraints, combined with strong demand for construction, has seen price growth for some materials (such as timber, aluminium and steel) soar by 20–34% in 2021. Closed international borders have also led to labour shortages, it says. This may have a lag time before it corrects itself, even with the recent opening up.
This may exacerbate the growing trend of householders choosing to move to smaller cities and towns to get larger and more affordable homes. The report shows unprecedented demand in regional Australia over the course of 2020 and 2021 saw dwelling price growth in regional NSW lift by 40.1% - substantially greater than dwelling price growth in Sydney (27.2%). Regional Victoria’s growth (29.9%) was more than double that of Melbourne (12.2%).
Rentals in regional areas are also on the rise. The Hood Tenant Report cited in Rate City shows that of the top 20 areas around Australia mostly likely to see rent increases, 11 are in regional locations, while only nine are in the capital cities. Most of the pressure is on tenants in parts of WA and Qld, with vacancy rates as low as zero per cent.
All in all, finding an affordable place to live is a challenge for all but the wealthiest. Many of the wild facts about the state of Australia’s housing market are jaw-dropping. While pockets of affordability do exist, finding them takes a calm and cool head, patience, persistence, and plenty of research.
These developments would therefore seem to imply that despite much talk about the real estate market levelling out in 2022, any normalcy may be short-lived before it takes off again!
Image: Franklin Wharf, Hobart, by Michael Fromholtz, Wikipedia.