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Behind Australia’s Undersupply Emergency?

Your forgiven for thinking this was about the great paper-gate of 2020. As inconvenient as the lack of supply of quality dunny paper was, I’m afraid we have bigger fish to fry.

Most Australian’s biggest dreams and aspirations involve real estate. For me it was to buy my first home, buy a home to accommodate a bigger family, upgrade to a nicer home and invest in my families future.

However, right now without the guidance, education and networks of trusted property experts the market is FROZEN. Yes that’s right the market is locked up and the key has been thrown away.

The Australian property market has a significant undersupply in both properties for sale and properties for rent across the majority of the country.

Why has this happened? It’s not as if Australia has had a huge population boom overnight?

To find these answers we need to look back at the boom of Sydney & Melbourne in 2013 – 2017.

Sydney & Melbourne were experiencing a robust property market filled with consumer confidence and let’s face it all property records were broken.

However, a series of policy changes were introduced to cool the Sydney & Melbourne market which in turn affected national markets. There is no doubt these policies were misinformed, and the repercussions were felt across markets throughout Australia even those that had not been performing well.

These policies introduced by APRA (Australian Prudential Regulation Authority) did not take into account the disparity in housing costs around the nation, difference in activity levels, the new construction supply pipeline and discrepancy in strength and weaknesses of local economies essentially putting the handbrake on the national market. These policies all revolved around access to credit making it extremely difficult to obtain finance to purchase. Add to this the banking royal commission and labor government proposed negative gearing reform, all confidence left the market meaning Australian’s were holding their existing properties and the construction of new homes slowed.

Fast forward to today the introduction of the “home builder” grant has heavily stimulated the construction industry and has seen a huge number of new homes built across the country however given this grant was only available for owner occupiers this has seen the new housing market swamped by first home owners leaving little opportunity for investors. As a result, the immense pressure of the rental market has seen rental prices grow in excess of 20% in some locations across the country.

You’re probably wondering what is the solution?

This cannot be fixed overnight. However, if we are to calibrate the supply of housing in Australia, we need to remove barriers of entry for investors. This includes making obtaining finance more achievable for the everyday investor, drastically improving banking inefficiencies which can result in banks taking up to 180 days to assess finance applications, continue to incentivize investors to build new investment properties via tax relief/benefits and certainty that as a nation of property lovers that the rug will not be pulled from beneath us similar to what happened to borrowers in 2013 boom.

Would you like to discuss more? Contact us today.

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