HIA’S 2016 Report: Thinking Long Term On Housing Supply

Australia’s population recently passed 24 million, and is expected to hit between 34 and 42 million by 2050.1 The impact of this population growth on the housing market was explored in the 2016 edition of the Housing Industry Australia’s (HIA) Housing Australia’s Future report.

Housing The Future

One of the questions arising from HIA’s Housing Australia’s Future report is: Where will Australia’s new residents live?

Construction began on 220,000 new dwellings in 2015, a record high, but the HIA anticipates a downturn. This prediction is already proving true, with new home building approvals down 7.5% in January this year.2 Only 160,100 new dwellings are estimated to be built in 2018.3

What’s Causing The Decline?

There are several factors contributing to the anticipated decline in new housing approvals and construction. Lenders have begun to respond to pressure from Australia’s bank regulator, APRA, to tighten lending criteria4; foreign investors are being required to pay increased fees; and housing affordability continues to be an issue, driven in part by a shortfall in supply.

How Many Houses Will We Need In The Future?

The question really is: how much housing will we need to support our growing population?

According to the HIA, this will depend on growth levels and living standards, but the number of new homes required each year could be up to 250,000.5

If the most optimistic estimates are realised, we’re certain to fall short at
the current rate of construction. While new dwellings built were at their highest point in 2015, these levels have only been achieved three times in 30 years. Relying solely on organic growth won’t be enough.

What Needs To Change?

Government policy will play a key role in meeting the increased demand. Housing affordability is likely be on the ALP’s election agenda, as the Coalition did not alter current negative gearing regulations in its 2016 budget. (Negative gearing offers incentives for investor-buyers to purchase property, thereby increasing demand and driving up prices.) Taxation reform could also contribute to meeting increased demand for housing, while measures such as funding community infrastructure, strategic planning, providing access to more land, and reducing or demolishing state-imposed stamp duty could encourage an increase in future housing stock.

Sources

1 HIA press release, 23 February 2016, http://bit.ly/1SXLnIJ
2 Property Observer, 11 March 2016, http://bit.ly/1UxY532
3 http://abc.net.au/news/2016-03-16/housing-construction-to-slow-sharply-later-this-year/7251714
4 http://abc.net.au/news/2016-03-21/home-loan-criteria-tightened-bank-regulator-apra/7264030
5 HIA press release, 23 February 2016.