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.
| 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 |
Click here to return to the article
| 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 |
Click Here to return to the article
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
