Originally published
In this article, I talk about the current state of Australia’s housing market, examining past and projected population growth, housing demand, and the supply of new dwellings.
Four tables provide a comprehensive overview of the data, shedding light on the significant challenges and imbalances within the housing sector.
Population growth and projections
Annual population growth is expected to increase.
I do think that Victoria’s official forecast is too high, and Queensland’s is too low.
As a result, the need to build more new homes has risen too.
On average the need for new dwellings over the past five years was around 147,000 per annum.
Over the next half-decade, this underlying demand is likely to reach 227,000 each year.
This is an 80,000 increase or a 54% boost.
The 227,000 annual demand is the equivalent of building a Canberra or Newcastle each year.
And the 80,000 increase from the previous annual five-year average is like building another Hobart every year.
Underlying demand for new dwellings
In addition, the need for new housing builds during 2022/23 is 273,750 or about equal to building another Gold Coast!
These are big numbers.
The annual demand for new homes is based on the number of adults per dwelling (which is 1.92 for Australia) and there are on average 0.58 children per household.
Some of my colleagues use 2.50 people per dwelling to help determine underlying new housing demand.
This is wrong.
You need to remove people, children, from the equation as they – in over 95% of cases – live with adults.
Dwelling commencements and the difference between supply and demand
There have been only 171,500 dwelling commencements (my estimates based on the second half of calendar 2022) during 2022/23 – so the new housing market is undersupplied, by some 102,000 dwellings or by 38%.
All states and territories are undersupplied this year.
When looking at housing demand versus new supply (i.e., housing commencement) the last couple of rows in Table 4 suggest that New South Wales, Victoria, the Northern Territory and to a lesser extent South Australia and the ACT have had enough new builds over the past five years.
Whilst Queensland, Western Australia and Tasmania remain undersupplied.
Let’s unpack this a bit.
Let’s unpack this a bit.Firstly, given the fall in housing need during 2020/21 (Covid immigration restrictions) which saw annual population growth across the country fall to just 32,790 and hence new housing demand was around 18,000 in fiscal 2021, yet new housing commencements were 213,700 that same year.
This mismatch was largely due to the HomeBuilder initiative and record low-interest rates.
Yet some 15% of these new housing starts (≈ 33,000 dwellings) – and despite them being from financial 2021 – have yet to be completed, due to the building strife that is currently plaguing Australia’s building industry and some state government’s building programmes.
This is especially the case in Queensland given the 2032 Olympics.
In addition, there has been a large volume of new housing starts during fiscal 2022 (≈ 208,000 across Australia) of which some 16% (≈ 34,000) have not yet been completed.
In summary…
There are just under 70,000 new dwellings that have started construction but are yet completed in the Australian new building pipeline.
Assuming these dwellings are delivered, this will help alleviate housing supply – but these 70,000 new dwellings –– equate to just 25% of the 2023 demand.
Almost a lot of the new housing in New South Wales and Victoria is purchased by offshore interests.
Quite a bit of this stock – my estimate is that it is as high as 30% – is locked up, and if used, it is only occasionally.
This is an issue that needs to be addressed.
CREDIT Originally published by Michael Matusik – Original article can be found here : https://propertyupdate.com.au/australias-housing-market-population-growth-housing-demand-and-supply-imbalance/