Australia could face a “concerning” housing shortfall of more than 160,000 homes over the next decade, according to new projections.
The National Housing Finance and Investment Corporation‘s State of the Nation’s Housing 2021–22 report shows when net overseas migration returns to pre-covid levels by 2024–25, the number of new households will start to outpace supply to the tune of 163,400 homes by 2032.
“The projections in this report are concerning, and mirror the same warnings the Property Council of Australia has been making for some time,” Mr Morrison said.
“The report clearly shows that between 2025 and 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.”
Real Estate Institute of NSW Chief Executive Officer Tim McKibbin said the supply crisis needed to be addressed quickly.
“At a time when supply is the best solution to affordability, it also appears to be under the most threat,” Mr McKibbin said.
“The supply crisis is not a quick fix and recent NSW Department of Planning figures highlight the enormity of the challenge. Less than 30,000 homes were completed in the Greater Sydney area in 2020-21, compared to over 42,000 in 2017-18 and 2018-19, and well below what’s needed.
“The pandemic may have temporarily put the brakes on demand, but the level of pent-up demand has remained unsatisfied for some time and this drop in new dwelling completions, combined with the economy and the borders opening up, exacerbates an already perilous situation.”
“Household formation is across the board expected to exceed supply by 164,300 by 2024-2025 after some short-term relief this year and next, which will maintain pressure on affordability, particularly as interest rates increase,” Mr Groves said.
“With these challenges a Federal and State Government Plan for both housing supply and affordability is badly needed.”
The report found that it will take a number of years for net overseas migration numbers to fully recover from international border closures.
NHFIC estimates new housing supply will outpace new household formation by 115,300 in 2022, and 35,500 in 2023, with more than 550,000 new dwellings expected to be constructed (184,000 per year) over the next three years.
The report noted that while more than 1.7 million new households are expected to form across Australia from 2022 to 2032, Australia’s population is predicted to be 1.5 million lower in 2031, compared with pre-pandemic estimates due to closed borders.
The strongest growth in new households is expected to come from single-person households (595,000), followed by families without children (488,000), then families with children (361,000).
Serviced and development-ready greenfield land supply remains a significant constraint in key markets, such as Sydney and South-east QLD according to NHFIC. Given it can take several years to bring new housing supply to market in some areas, this could limit the industry’s ability to meet future demand when population growth recovers.
Mr Morrison said more land needs to be released to ease supply pressures.
“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,” Mr Morrison said.
“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.”
NHFIC notes a shortage of multi-unit dwelling completions is expected in the next two to three years, especially as rental markets are already tightening, and demand will lift as international border restrictions are relaxed.
It said more higher-density dwellings will be required closer to CBDs to meet unmet demand.
Over the course of 2021, rents increased dramatically across the country, while first-home buyer affordability has deteriorated as prices rose sharply.
Mr Groves said there was little relief on the horizon for renters and first-home buyers.
“Affordability for renters and first-home buyers deteriorated across most cities and regions in 2021 (to September), except in Sydney and Melbourne, where aggregate rental affordability modestly improved,” Mr Groves said.
“However, rental pressures have been building in these cities more recently and this situation is set to worsen in the short term.
“Rents are likely to continue to rise in the near term as international border restrictions are relaxed.
“Sydney and Hobart remain the most unaffordable cities for first home buyers with the bottom 60 per cent of income earners able to afford less than 10 per cent of available properties in the market.
“All of these factors point for the need for a long-term plan and resourcing from all levels of government.”