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Housing to Year 2020

In March this year, HIA released a pilot report titled Housing to 2020. The report, which is free to HIA members, is a new initiative from the HIA Economics Group and unveils some unique economic research. It looks at the current and future level of housing demand and expected dwelling requirements in Australia. From the analysis, we are able to put the spotlight on the regions where the housing shortage can be expected to be greatest and pinpoint regions where the most work will be required to ensure a smooth release of affordable and reasonably located land.

Record population is driving the intensifying demand for housing in Australia. It's no secret that Australia has   experienced a boom in population growth, mainly but not solely due to very strong immigration. Federal Treasury projects that Australia's population will reach 36 million by 2050, providing both enormous challenges and opportunities. Regardless of what the actual population figure turns out to be in the future, we still have the fact that key to the success or otherwise in adapting to a growing population will be the provision of adequate, affordable, and appropriate housing.

While Australia's population has been growing at record rate in recent years, as we're all aware new home building declined in alarming fashion at the same time. The resulting imbalance in supply and demand for housing has created a shortage, leaving many people either homeless or forced into inadequate housing in terms of size and proximity to jobs.

Population Growth

Australia's housing shortage has partly reflected a lack of supply to meet a very large jump in overseas migration and also historically fast natural population growth. In September 2009, the number of migrants to Australia accounted for nearly two-thirds of the nation's population growth. These migrants are generally skilled migrants and make a clear positive contribution to the economy.

During the year to September 2009 Australia's population grew by 2.3 per cent, the fastest rate since the late 1960's. In addition to overseas migration, this fast pace also reflected a large increase in the natural population of 154,500 people (296,300 babies less 141,800 deaths).

All these people have a basic and essential need: housing - be it rented accommodation or owner-occupier dwellings. However, Australia is simply not keeping up with the demand and this has been reflected in higher rents, extremely tight rental vacancies, and strong pressure on existing home prices.

Housing and rental affordability

While many factors contribute to the housing affordability picture, there is no doubt that house prices have grown rapidly in the past decade. In December 1999 the median established house price across all capital cities was $200,000 and by December 2009 this had increased to $480,000. This represents a total increase of 140 per cent, and annual growth of more than 9 per cent.

In stark contrast, average full-time wages has increased from $49,652 to $66,242 per annum - an increase of just 59 per cent. It is true that there has been a small increase in the incidence of dual income households during this period; however, the population has not altered greatly for first home buyers, which are dominated by young couples and singles.

For renters, the equation has become more difficult over the past two years as the national housing shortage has reduced the availability of rental properties. During the past two financial years rents have grown across Australian capital cities by more than 14 per cent, a decent amount beyond the cost of living. It's not just expensive to own a home; it's expensive to rent a home.

Australia's housing shortage

Across the country, for the year 2009, the total level of demand for housing was estimated to be more than 200,000 dwellings, and completions fell 70,000 short of that level at just under 130,000. The nation's housing requirement in 2010 will be something very similar to that 200,000 mark.

The estimated underlying demand requirements over the coming 10 years also fell short of past building levels. HIA projects that Australia will need 1.92 million new dwellings in the next 10 years, compared with a construction level during the past decade of 1.5 million. We simply need to build more homes, and do it fast.

Australia's lack of new home building implies that the former housing 'surplus' that existed in the early part of the past decade turned into a housing 'shortage'. HIA estimates that as of the beginning of 2010 the shortage was 109,200 dwellings, and rising. The mass deterioration in new home building activity over the better part of the decade is bad news for Australia. If current housing trends were to persist, HIA projects Australia's housing shortage to reach 288,000 dwellings by 2015 and 466,000 dwellings by 2020.

So what is preventing us from building an adequate   number of homes? The reality in many regions and cities in Australia is that affordable, well located land is not abundant. In addition to this, planning restrictions, higher taxation and charges on new housing relative to existing dwellings, labour shortages, and onerous regulation biased toward new housing are all perpetuating the problem.

If we cannot address these issues, the accumulation of a housing shortage will see continued pressure on housing affordability over the next decade. The lack of affordable and appropriately located rental properties will only worsen, and existing house price growth will continue to outstrip incomes growth.

Australian regions

HIA has the only publically available information on housing shortages by local area across Australia. The local government area (LGA) was chosen as the regional unit of analysis for the research as local government is typically the planning region. It is   important to note the difference between an LGA and a city or regional area. For example, Table 1 discusses the 'Brisbane LGA', which is not synonymous with Brisbane city or greater Brisbane. In fact, greater Brisbane contains several LGA's.

Housing shortages exist in just under half (295) of the 669 LGA's across the country. Not surprisingly, the majority of the shortages can be found in and around metropolitan Sydney and South-East Queensland (as shown by the table). As of 2009, Brisbane's housing shortage was clearly the most severe with a shortage of 6474 dwellings. The Sydney LGA followed in second place with a deficit of 5234. Another LGA within the greater Sydney area, Bankstown, took third place with a marked   shortage to the effect of 2285 dwellings. The South-East Queensland region of Beaudesert finished 2009 also in substantial shortage, its deficit amounting to 2227 dwellings. Canterbury (NSW) and Melbourne (Vic) rounded out those LGAs with a housing shortage greater than 2000 dwellings at the end of 2009.

Table 2 details those LGAs across the country where the demand for housing is projected to be greatest. It is interesting to note from the table that many of the LGAs with the greatest housing shortage are also the same regions with the highest level of demand. Again, it's the growth areas in greater Sydney area and South-East Queensland where demand will be amongst the highest in the nation. The growth areas in and around Melbourne also show high levels of demand. Melbourne also show high levels of demand. Current construction levels in most of these areas are not sufficient to meet the population growth needs.

Key to the success or otherwise in adapting to such a growing population will be the provision of adequate, affordable, and appropriate housing

Not surprisingly, the underlying demand for housing over the next decade is expected to be strongest in three prominent South-East Queensland LGAs - Gold Coast, Brisbane and Ipswich. Based on their respective current building trends, the shortfall in dwellings will be substantial. However, Brisbane's shortage is expected to be significantly less severe with a shortfall of 2936 dwelling expected. Ipswich and the Gold Coast are expected to emerge in 2020 with projected deficits of 18,278 and 10,777, respectively.

Table 1 - Housing Shortages in 2009
Rank LGA Housing Shortage
1 Brisbane -6474
2 Sydney -5234
3 Bankstown -2285
4 Beaudesert -2227
5 Canterbury -2135
6 Melbourne -2121
7 Wanneroo -1963
8 Ipswich -1913
9 Blacktown -1878
10 Auburn -1780
11 Camden -1752
12 Rockingham -1662
13 Rockdale -1584
14 Port Phillip -1577
15 Caboolture -1485
16 Ryde -1429
17 Logan -1414
18 Wyong -1378
19 Tweed -1308
20 Maroochy -1304

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Table 2 - Australia's Housing Demand and Supply
Rank LGA State Demand Current Trend Shortfall
1 Gold Coast QLD 76,500 65,723 10,777
2 Brisbane QLD 70,549 67,613 2936
3 Ipswich QLD 40,564 22.,286 18,278
4 Wanneroo WA 37,896 26,602 11,294
5 Melbourne VIC 34,288 18,231 16,058
6 Wyndham VIC 29,141 30,358 -1217
7 Sydney NSW 26,693 13,653 13,040
8 Casey VIC 25,706 24,107 1598
9 Maroochy QLD 24,092 15,118 8975
10 ACT ACT 23,900 24,478 -578
11 Blacktown NSW 23,830 14,569 9262
12 Melton VIC 22,688 19,782 2906
13 Caboolture QLD 20,577 16,733 3844
14 Pine Rivers QLD 20,264 19,229 1034
15 Rockingham WA 19,198 10,157 9041
16 Cairns QLD 18,608 17,732 876
17 Whittlesea VIC 17,895 21,247 -3352
18 Caloundra QLD 17,051 13,446 3605
19 Wyong NSW 16,652 5304 11,348
20 Mornington Peninsula VIC 16,491 13,342 3149

 

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HIA members can obtain a free copy of Housing to 2020 by visiting the Economics Group Website at www.economics.hia.com.au

For further information or a consultation please do not hesitate to Contact FAAR

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