The government must do more to address supply and affordability, peak body says
The National Housing Finance & Investment Corporation’s (NFHIC) State of the Nation report confirms the need for a national housing affordability and supply plan, according to the Real Estate Institute of Australia.
REIA president Hayden Groves said the report supports REIA’s push for the government to address supply as the main way to tackle affordability issues.
“It remains unknown to what extent supply-chain crunches and labour shortages will affect productivity for new builds,” Groves said. “NHFIC does note the impact supply constraints and associated cost increases will have on meeting expected demand growth. Should the impact be more acute or prolonged, the supply and demand gap will worsen.”
Groves said that new household formation is expected to exceed supply by 164,300 by 2024-25, which will maintain pressure on affordability – particularly as interest rates rise.
“With these challenges, a federal and state government plan for both housing supply and affordability is badly needed,” he said.
Groves said the NFHIC’s report previews key impacts to expect as Australians rebuild in the wake of COVID-19.
“Net overseas migration will remain negative at -44,000 with the overall population outlook anticipated to be 1.5 million lower in 2031 than anticipated,” he said. “The growth in both single-person households (35%) and couple-only households (29%) hints towards increasing demand in unit- or townhouse-based housing stock. Again, both of these trends would benefit from a plan.”
Groves also said there was currently little relief in sight for renters and first-home buyers.
“Affordability for renters and first-home buyers deteriorated across most cities and regions in 2021 (to September), except in Sydney and Melbourne, where aggregate rental affordability modestly improved,” he said. “However, rental pressures have been building in these cities more recently, and this situation is set to worsen in the short term. Rents are likely to continue to rise in the near term as international border restrictions are relaxed.”
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Average loan sizes have increased to $570,000, while the weighted average median house price for the combined capital cities increased to $961,059 over the year to September, Groves said. Sydney and Hobart remain the most unaffordable to first-home buyers, with less than 10% of available properties affordable to people in the bottom 60% of income earners.
“All of these factors point to the need for a long-term plan and resourcing from all levels of government,” Groves said.
