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Is housing supply driven solely by demand? New research sheds light

New Australian Housing and Urban Research Institute (AHURI) research reveals what many of us assumed, that housing supply across Australia is uneven.

The uneven distribution of housing supply 2006-2016 report was authored by academics at the University of Sydney, Curtin University, and the University of Adelaide, and delves into both the distribution of housing over the 10-year period, and the reasons for such a skewed supply.

The study finds that, between 2006 and 2016, Western Australia saw the greatest increase in new dwellings, with 26 per cent, while New South Wales saw the least, at 12 per cent.

The report found 37 of the 489 local government areas analysed for
this research increased stock levels by more than 50 per cent over
10 years, while 70 per cent increased stock by up to 25 per cent.

In terms of cities, in Sydney and Melbourne new housing is concentrated in “high-value inner-city localities near transport and employment hubs”, but across every major city, “significant amounts of new housing production are occurring in lower-value outer areas”.

“We wanted to understand patterns of new housing supply, whether supply is driven by price or other factors, and what government could do to encourage new supply in specific locations,” Curtin University lead researcher Steven Rowley said.

“When considered in relation to population numbers, the distribution of new supply was quite even across Greater Sydney.

“In contrast, Greater Melbourne saw strong supply in its inner and outer areas but little in established middle areas, while supply in Perth and Adelaide was mostly on the urban fringes.”

Surprisingly, all states saw a fall in three-bedroom homes (down from 47 per cent to 42 per cent) while experiencing a rise in four and five-bedrooms (up from 23 to 27 per cent.)

“One of the key things to note,” Prof Rowley continued, “is the fact that we have a large supply of housing on the outer areas because it is just easier for developers to build that sort of product”.

“It is easier in the terms of planning, as the infrastructure requirements are often less complex than building infill.

“Ultimately developers need to earn a profit and being able to access land that is relatively easy to develop when there is a demand there allows the developer to realise these profits.”

The report notes: “A more responsive housing system—attuned to changing population needs rather than dependent on property market cycles—is likely to require a more diversified system of production. This implies continued efforts to expand and sustain the social and affordable housing sector, as well as new initiatives to diversify housing product”.

Furthermore, the report recommends that sites are “realistically zoned in order to stimulate development and maximise development outcomes”, explaining: “Policy makers need to take market conditions into account when zoning sites, because if they get it wrong there will be no development or, in some cases, sites and infrastructure will be underutilised”.

“An assessment of what would be financially feasible to develop on sites should be undertaken during any zoning or rezoning process.”

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