Housing supply tops property industry concerns

Concerns about housing supply shortages and affordability have worsened within the property industry, which is pushing for greater government action.

Concerns about housing supply shortages and affordability have worsened within the property industry, which is pushing for greater government action.

The Property Council of Australia and ANZ’s latest sentiment survey revealed 41 per cent of the industry lists the dual issues as the most critical requiring attention.

The figure is a 10 percentage points jump on the previous quarter, representing the highest response on record for the question.

Property Council chief executive Mike Zorbas said it is no surprise housing affordability and supply are front of mind for property professionals.

“It’s quite fascinating,” Mr Zorbas said. “All of these property owners, developers, investors are at the coalface; they’re often seeing indicators on the ground, about conditions in the market … so they can see what’s really working and what’s not in state and territory jurisdictions around the country long in advance of government decision-makers.

“That jump is reflective of everything else that is part of the dominant narrative at the moment around the housing deficit.”

Industry concern about supply is more than double that for economic management (16 per cent) and energy, environment and emissions (13 per cent).

Building approvals have consistently fallen in recent months following the Home Builder-inspired construction boom in mid-2020. Last week, a housing report released by the federal government’s National Housing Finance and Investment Corporation found the country faces a national deficit of 79,300 homes over the next decade.

Mr Zorbas believed this count was “conservative”.

“Those numbers are extremely judicious,” he said. “To have a move of 80,000 in their conservative numbers is quite worrying.

“That perfect storm that exists between population growth, the very welcome return of students from overseas, and obviously the drive to get highly talented migrants out here to fill shortages means that there is going to be a real reckoning over the next 12 months not only at market, as a by-product, the rental market.”

The survey of 776 industry professionals was conducted in early March ahead of the recent rate pause.

While industry sentiment has remained stable over the past six months, expectations around forward work and staffing expectations have fallen in the most recent survey, although they remain positive.

ANZ senior economist Felicity Emmett said this is due to the cyclic low of the construction cycle but is a “bit concerning” given Australia’s low unemployment rate.

“The cycle has been flattened because of the capacity constraints, difficulty getting workers given difficulty getting materials, and also the weather disruptions,” she said.

“We are just starting to see the impact of the decline in building approvals, which has been really quite significant over the past year or so, and so that is feeding through into firm’s pipelines of activity.

“You are going to see that forward work schedule come off and, with it, staffing levels.”

Mr Zorbas said the figures reveal an urgent need for the federal senate to pass the Albanese government‘s housing policies, although he noted the hope of delivering one million new homes by 2029 is under threat unless more policy action is taken in the coming months to underpin supply.

However, other indicators have improved. Expectations around access to debt financing showed stronger results in all states surveyed, although the business in ACT recorded the weakest projections in four quarters.

The industry also believes residential property prices will continue to improve in the coming months, with indications the downturn may have ended already coming through.

Economic growth expectations remained negative at both the national and state levels, falling to -32 and -13, respectively.