Why an extra million homes can’t come soon enough

There’s a housing shortage in Australia, and the Government is committed to fixing that. Find out what difference one million extra homes across the nation would make.

A key commitment set out by the federal government in Tuesday’s budget was the establishment of a ‘Housing Accord’ that would see one million new homes built over five years from 2024.

The Accord sets out a plan to bring together all tiers of government, along with private and institutional investors, to overcome the key issues impacting supply.

PropTrack economist Anne Flaherty

Proposed solutions include rezoning and releasing new land, improving planning regulations, and enabling easier financing of development projects through superannuation and institutional investment.

A lack of supply is one of the key issues impacting affordability for both buyers and renters, and these new homes can’t come soon enough.

Despite being one of Australia’s more affordable cities, Adelaide is still categorised as ‘severely unaffordable’, according to Demographia’s 2022 International Housing Affordability report.

Property prices in Greater Adelaide have fallen by just 0.3 per cent from their peak earlier in the year and remain a whopping 42 per cent higher compared to March 2020, according to PropTrack’s Home Price Index.

Low housing supply is also causing a deterioration in rental affordability. Across Australia, rents grew at the fastest rate on record over the September quarter, with rents in Greater Adelaide now sitting 13 per cent higher compared to 12 months ago.

Houses are needed now. Desperately.

This year, the number of properties advertised for rent on realestate.com.au fell to the lowest level seen since 2003. The return of population growth could see supply shrink further, adding even more fuel to rent growth.

Currently, around 90 per cent of Australia’s rental properties are owned by private investors – a share significantly higher than in many other countries.

There’s an opportunity for institutional capital to play in this space, but while we have started to see increased investment in build-to-rent, there remain significant tax barriers to overcome before the model can really take off.

The federal government’s commitment to working with institutional investors to understand and overcome these barriers is extremely encouraging and should help to support supply over the mid to long term.

Bricks stacked up and waiting to be laid, and not someone’s attempt at a wall. Because without mortar that will fall down.

Growth in demand for housing is expected to outpace the delivery of new homes over the next few years and affordability will remain an issue for many households.

Over the past five years, one million new homes were delivered in Australia, and many have questioned whether these extra million homes would be built regardless of the government’s commitment.

But what we saw in recent years was out of the ordinary and driven by extremely cheap debt and government grants. Development activity is now slowing due to rising construction costs and timelines.

Anne Flaherty is an economist at PropTrack