Vanishing Households Undercut Claim of Australia Shortage
Australia has almost 1 million fewer households than assumed in government forecasts of a housing shortage, raising doubts about a supply shortfall cited as the main reason the nation will avoid a U.S.-style crash.
The Pacific nation had 7.8 million households, data released yesterday from the 2011 Census showed. That compared with estimates of 8.7 million as of June 2010, according to the latest figures used by the National Housing Supply Council, a group created by the government in May 2008 to monitor housing demand, supply and affordability. Australia’s population also grew by 300,000 less than previously estimated, to 21.5 million.
“There’s been a bit of a disconnect between the estimates between the census points and the actual census data,” said David Cannington, Melbourne-based economist at Australia & New Zealand Banking Group Ltd. (ANZ) “My feeling is that some of the underlying housing demand numbers will be revised down.”
Australia faces a shortage of about 369,000 homes by 2016, under a medium household growth scenario, which assumes the nation will have 9.7 million households by that time, the council said in a report released last week. While home prices across Australia’s eight state capitals fell for a fifth consecutive quarter in the three months through March, the longest stretch of losses on record, the Council has maintained that the gap between supply and underlying demand has widened.
The council’s figures are based on the last census, conducted in 2006, with adjustments for additions and reductions of homes, said Owen Donald, Sydney-based chairman of the National Housing Supply Council, in a telephone interview.
“On the face of it, 900,000 is a gigantic difference,” he said. “We need to get to the bottom of what’s in the statistics bureau numbers.”
Some 75.6 percent of private dwellings were detached homes, 1 percentage point below 2006. The number of semi-detached homes and apartments both increased, to 9.9 percent and 13.6 percent respectively.
The average household size remained unchanged at 2.6 people, unexpected in a nation with an aging population where more people would typically live alone or in childless homes, Donald said. The number of single-person households slipped to 24.3 percent from 24.4 percent in 2006, the census showed.
The percentage of family households slid to 71.5 percent from 71.7 percent, while group households climbed to 4.1 percent from 3.9 percent in 2006, the data showed.
This is the first time since European settlement that the utilization of homes has increased in the country, with more people occupying the average home than there was five years ago, Craig James, chief equities economist at Commonwealth Bank of Australia (CBA) Ltd., said in an e-mailed report dated yesterday.
“The increase in home use clearly has implications for the home building sector and residential real estate,” James wrote. “If rents and mortgage repayments continue to outpace housing income, then the one-time lift in home usage may become more of a trend.”
The median monthly mortgage payment jumped 38 percent to A$1,800 ($1,830), according to the census figures, which are not adjusted for inflation. The median weekly rent surged 50 percent to A$285 a week.
While affordability has improved as prices dropped, both home-loan payments and rents as a proportion of median family income are still well above the long-term average, the Real Estate Institute of Australia said in a release on June 6.
Home prices across Australia have seen quarterly declines since the beginning of 2011 as global economic uncertainty and fears of overpaying for properties in the English-speaking world’s most unaffordable housing market kept buyers sidelined.
Dwellings in Australia cost 6.7 times the average annual income as of the third quarter of 2011, Illinois-based consulting company Demographia said in a report in January.
The increase in the number of people living in group households and in apartments and townhouses backs this up, said David Collyer, campaign manager at tax reform advocacy group Prosper Australia.
“Young adults have gone back home with mum and dad, or are sharing houses,” said Collyer, who argues that Australia has an oversupply of housing based on statistics showing water usage and new building data. “Household sizes have gone up even more than people think, and the oversupply of housing will be revealed to be even worse than we thought.”
As more Australians live with friends or parents to combat falling affordability, the number of vacant dwellings rose to 934,471 in the 2011 census from 830,376 in 2006.
The increase was at least partly due to more Australians owning second or holiday homes, said Matthew Hassan, Sydney- based senior economist at Westpac Banking Corp. (WBC)
The proportion of households wholly owning their homes was 32.1 percent from 34 percent in 2006, while owners with a mortgage climbed to 34.9 percent of households versus 34.1 percent. Renters comprised 29.6 percent of households from 28.1 percent in 2006, the census data showed.
Economists at Westpac, ANZ Bank and the building industry- backed Housing Industry Association are among those that have argued a shortage of homes will keep Australian prices from collapsing to the extent seen in the U.S., where they’ve slumped more than 35 percent below their 2006 peak.
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