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The number of newly constructed homes will ramp up over the decade, but with new household formation also expected to increase, Australia’s ability to meet housing demand appears fragile, according to a new report.
The National Housing Finance and Investment Corporation’s (NHFIC) second annual State of the Nation’s Housing report indicates that while supply pressures may experience some relief in the short term, the nation will once again feel the crunch as new housing stock fails to keep up with the rate of new household formation in as little as two or three years.
More than 1.7 million new households are expected to form across Australia from 2022 to 2032, with the majority of those comprising a single person, as opposed to couples or families, according to NHFIC.
Over the next two years, however, that figure is substantially lower than previously projected, with various factors relating to COVID-19 stymying household formation, including the near halt of the country’s usually healthy tide of migration.
With fewer than expected people seeking homes, new net housing supply additions are actually expected to outpace new household formation by 115,300 in 2022 and 35,500 in 2023. The pace of construction has also been helped along by record-low interest rates and federal stimulus prompting Australians to build.
As net overseas migration begins to return to pre-pandemic levels, however, things start to slide. Australia’s migration rate is expected to fully recover to pre-pandemic levels by 2024-25, and from then, household formation is expected to outpace new supply by a cumulative 163,400 dwellings to 2032, NHFIC reported.
Hayden Groves, president of the Real Estate Institute of Australia, said this latest research showed why the country was badly in need of a national plan “to address supply as the main way to solve the affordability dilemma”.
NHFIC noted that supply constraints and associated cost increases could have an impact on expected growth, which Mr Groves pointed to as evidence of the fragility of the situation.
“It remains unknown to what extent supply chain crunches and labour shortages will affect productivity for new builds,” Mr Groves said.
“Should the impact be more acute or prolonged the supply and demand gap will worsen,” he warned.
His comments came at the same time as the Housing Industry Association sounded alarm bells over a further deterioration in the shortage of skilled trades, which they now consider to be “the most significant shortage on record”.
HIA economist Angela Lillicrap called for the government to develop a visa that will enable the residential building industry to address trade shortages through skilled migration.
“Skilled migration is the pivotal to alleviate the pressure on skilled trades in the short-term,” Ms Lillicrap said.
“While permanent and short-term visas are part of Australia’s skilled migration program and the building trades that have been in the most acute shortages are included on lists of eligible occupations, there has been very little take up within the construction industry, particularly the residential building industry. Several aspects of these visas render them impractical for use by residential building businesses.”
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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