REA Group Property Demand Index for January, Key Points
- Sydney is on the road to a housing affordability crisis
- Tasmanian housing demand remains high resulting in strong price growth
- Demand levels on realestate.com.au are surging
- Challenging conditions remain in Western Australian and Northern Territory
Housing unaffordability can be solved only if there are more dwellings available for people to chose from especially in cities like Sydney and Melbourne, REA Group Chief Economist Nerida Consibee said.
“Housing unaffordability is generating continuing public debate across the country, but it’s time to admit we’re likely heading straight towards a housing affordability crisis in our two largest cities unless something changes.
“Demand levels on realestate.com.au continue to surge in Sydney and Melbourne, while house median prices continue to break records on the Eastern seaboard.
“Melbourne is better placed to weather the storm for longer, but Sydney, hampered by long-term underdevelopment, needs action. The only long term solution to the city’s affordability problem is to increase the supply of housing,” she said.
Conisbee said some things can be done to improve the supply of houses in Sydney which is the amalgamation of councils to improve planning systems and changes to New South Wales (NSW) strata laws.
“Better relationships between state government and developers should be a priority, in order to partner investment in public infrastructure such as roads, schools and shops with new developments.
“Sydney’s lack of affordability is an economic issue. If it’s too expensive to live in the city, people will begin to move to more affordable regions and cities. The first to move will be those in essential services, such as nurses, doctors, teachers, pharmacists, plumbers, police, who don’t necessarily need to live in a large, expensive city to secure work.
“Any changes to bank lending rates this month will determine demand levels for February. The Reserve Bank of Australia is expected to keep rates stable, or even decrease them this month. However, there is no guarantee that banks will follow suit.”
This has led to a lot of success in Melbourne which despite being an expensive city, is far more affordable than Sydney.
As for Western Australia and the Northern Territory conditions remain highly challenged where demand continues to fall, while Tasmania remains a standout, continuing to perform above expectation.
High levels of apartment development across the country are leading to demand levels increasing at a slower pace than housing and, despite very high demand for housing in the major Victoria and NSW markets, demand for apartments is stabilising in both states, she added.
The REA Group Property Demand Index is produced by REA Group, owner and operator of realestate.com.au. Download the report here.