Australia is facing a shortage of more than 640,000 homes over the next 20 years as demand outstrips supply, the National Housing Supply Council predicts.
The gap between demand for housing and supply increased by 28,200 in the year to June 30, 2010, to a total of 186,800 since 2001, the council, established by the Australian Treasurer and the Minister for Housing three years ago, said in its State of Supply Report released today. It will rise to 328,800 by 2015, the council forecasts.
“Supply is likely to fall short of the medium-growth projections in the short term,” it said in the report. “This growing gap indicates that housing production needs to lift well above trend to reduce the likelihood that housing shortages and poor affordability impact adversely on economic growth and standards of living.”
Home building approvals in Australia slumped 29.8 percent in October from a year earlier, the steepest drop since January 2009, as Europe’s debt crisis weighed on consumer sentiment. Reserve Bank of Australia Governor Glenn Stevens cut the benchmark interest rate by a quarter percentage point on Nov. 1 and again this month to 4.25 percent, to help the economy ride out global economic uncertainty.
Underlying demand for housing grew by about 159,200 dwellings in the year to June 30, 2010, higher than the 156,500 forecast in the previous report, while supply increased by 131,000 homes, less than the 140,700 projected, the council said in today’s report.
The biggest shortfalls were in New South Wales and Queensland states, the council said.
“There still isn’t a single item of proof to support that a housing shortage exists today, let alone in 20 years,” Kris Sayce, editor of Melbourne-based online newsletter Money Morning Australia, who argues the housing shortage is a myth, said in an e-mail. “The report simply takes 2001 as a base year and extrapolates data from that point assuming a perfect balance -- which even the council admits may not have been the case.”
The report calculates the gap between demand and supply based on changes since June 2001, when the market was close to “equilibrium” the council said. It doesn’t take into account the extent to which underlying demand and supply were out of balance at that time, it said.
Not Enough Dwellings
“We are simply not producing enough dwellings for the current and projected future number of households in Australia,” Urban Development Institute of Australia’s National President Julie Katz said in an e-mailed statement. “Without action from all levels of government to curb this lack of supply, Australia’s housing affordability problem will go from bad to worse.”
Australia has the most unaffordable homes in the English-speaking world, with dwellings costing 6.1 times the gross annual median household income, compared with 3 times in the U.S. and 5.2 times in the U.K., according to a January report by Belleville, Illinois-based consulting company Demographia.
The median price for houses and apartments across all regions in Australia was A$316,000 as of Oct. 31, according to real estate researcher RP Data. That compares with a median of $171,475 in the U.S., based on figures from property website Zillow.com.
While the housing market has slowed since the middle of 2010, the gap between supply and demand has continued to widen, the report said.
“While a softening of demand and prices and a projected widening gap between supply and underlying demand might seem contradictory, the council does not believe these phenomena are inconsistent in the short term,” according to the report. “The supply gap means that housing costs are higher than they would otherwise be, but there can still be volatility around these higher levels.”
Home prices fell 4 percent in the year to Oct. 31, according to real estate researcher RP Data, after rising 4.7 percent in 2010 and 13.6 percent in 2009.
Lack of finance for apartment projects has contributed to a significant decline in supply, even as the nation’s ageing population and an increase in single-person households and those without children push demand for higher-density developments higher, the council said.
The number of households is Australia is expected to increase to 12 million in 2030 from 8.7 million as of June 2010, the report estimates. The rising demand help eased the decline in prices of apartments, which slid 1.7 percent in October from a year ago, compared with a 4.7 percent drop in house prices, according to RP Data.