AND THE COMING POPULATION BOOM
BY GEORGE BOUGIAS, NATIONAL HEAD OF RESEARCH, OLIVER HUME
Housing affordability and dwelling shortages back to centre stage
The combined issues of housing affordability and dwelling shortages are once again emerging as key issues for the property industry, policy makers and the broader community.
Recent cyclical and relatively short-term movements in the property market – where we’ve moved from boom to moderation to a rebound again – have dominated discussion in recent years.
To an extent, the attention on the property cycle has overshadowed the larger and more important long-term question of how we adequately provide housing for a rapidly growing and changing population.
The human element
Although these are issues which I tackle every day in a professional setting it was on a recent trip to Sydney that I was reminded of the human element that is often ignored by some planners and even industry “experts”.
On checking out of my hotel the receptionist asked if I was returning home or continuing to travel. I answered I was returning home to Melbourne and a brief conversation ensued about the relative merits of both cities.
Of course, as a real estate economist the discussion invariably led to the property market and I mentioned that while both cities had seen robust price and rental growth in recent years, Melbourne was relatively more affordable.
“Indeed…. renting is so expensive in Sydney” came theresponse.
I was momentarily left speechless.
Of course, I was thinking about the cost of buying but was reminded, again, of the burgeoning number of renters. And, if buying property is increasingly difficult for many first home buyers, renting must be too, as more people compete in the increasingly expensive rental market.
Demand and supply
While taxation, lending and other factors might play a role, simple economics points to the fact that price, and therefore affordability, is first and foremost an issue of demand and supply.
Given that population growth is expected to remain reasonably strong for the foreseeable future, the need to maintain affordability by ensuring an adequate level of new dwellings over the medium to long term across all product types (houses, townhouses and apartments) is of paramount importance.
Unfortunately, current and emerging trends suggest housing supply may deteriorate further before it improves.
Building approvals continue to fall sharply highlighting the extent of the residential construction slowdown.
The recent release of the UDIA Victoria’s Residential Development Index suggests we will face an undersupply of new housing over the next 18-24 months.
Victorian dwelling building approvals declined by 21% to around 59,700 in 2018-19. This was down from around 75,600 in 2017-18 and follows an estimated shortfall of around 6,800 dwellings delivered in 2018-19.
Similarly, vacancy rates remain low.
In metropolitan Melbourne the vacancy rate was 2.2% most recently and has remaine below 3% (the estimated equilibrium rate) for several years.
Regional Victoria’s vacancy rate was even lower (1.3%) highlighting the strength of population growth and underlying housing demand in non-metropolitan areas.
Furthermore, growth in the number of active bonds held in Victoria continues to moderate (the number of active bonds is a gauge of the rental housing stock).
The total number of active bonds in Victoria at the end of the June quarter 2019 rose by only 2.1% on an annual basis – the lowest increase since late 2002 and below the growth in the rental market over the last decade.
Similarly, rental growth continues to outstrip inflation
especially in regional Victoria where rents continue to
increase at a rapid rate.
There is no one commonly accepted definition of a housing shortage (or an affordability crisis) but the few statistics cited above suggest we could face a range of challenges in accommodating a growing population.
However, where there are challenges, there is also opportunity.
For investors, a tightening property market bodes well for capital and rental growth over the medium to long-term.
Importantly, population growth is forecast to remain robust /=requiring a sizeable number of new dwellings every year.
The Victorian Government’s population forecasts suggest the state will need around 66,000 to 68,000 new dwellings every year.
The state is projected to add 4.7 million people from 2018 to 2056 reaching a population of 11.2 million.
Most of this growth is expected to occur in Greater Melbourne with the region’s population projected to grow by around 4.0 million people (from 5.0 million in 2018 to 9.0 million in 2056).
Many of our capital cities and towns are faced by major challenges in the housing market including a lack of affordable housing. This problem is especially acute in areas where people want to live close to where they work.
Some commentators have labelled the current situation an affordability crisis and one which, over the short-term at least, could deteriorate as new housing supply fails to provide for underlying demand.
In Victoria, as in many other jurisdictions, a growing population could mean that, over the medium to long term, affordability could continue to worsen.
This is likely to coincide, if not directly lead to, several other issues including further falls in home ownership rates and increase in the distances travelled between home and work.
It is likely that solving the affordability challenge will require a range of approaches and tools including those that involve greater collaboration between industry and government.
Addressing the housing supply question, however, is likely to be a key part of the puzzle.
Of course, other solutions, including more and better transport infrastructure and employment and businesses being located closer to where people can afford to live, will also be important.
It won’t be easy but if we focus first on having an adequate number of new dwellings in the right locations to cater for our burgeoning population it will mean we are on the way to something truly worthwhile – making the great Australian dream possible for as many Australians as possible.
“George Bougias is an economist, adviser and strategist specialising in real estate. He is the National Head of Research for Oliver Hume Corporation, one of Australia’s leading residential property funds and real estate services groups, and leads the firm’s in-house strategic research team. George has extensive experience across both private and public sectors, analysing and advising on Australia’s diverse property markets for government, private real estate developers and corporate and institutional clients. During his time in government George served as an advisor to the Innovation Economy Advisory Board (the Victorian State Government’s highest economic advisory body) and as an economist in the Department of Treasury and Finance and Department of State Development (Victorian State Government). He is a graduate of the University of Melbourne with a Bachelor of Commerce (Honours), majoring in economics, and a Bachelor of Arts, majoring in political science.”
在某种程度上,对房地产周期的关注掩盖了一个更大、更重 要的长期问题：如何才能为快速增长和不断变化的人口提 供充足的住房。
当然,作为一名房地产经济学家,讨论总是会回到房地产市 场上来。我提到说,虽然这两个城市近年来的房价和租金都 涨势强劲,但墨尔本的房价相对便宜一些。
ABOUT OLIVER HUME PROPERTY FUNDS
Oliver Hume Corporation is one of Australia’s most reputable residential property funds and real estate services groups.For over 60 years, they have helped owner-occupiers and investors achieve their property and investment goals. Oliver Hume Property Funds manages high-quality property developments, with strong profit and return forecasts founded upon quality research and backed by an extensive, thorough and rigorous due diligence process. By bringing investors together and pooling their capital, they can achieve a critical mass they can’t always reach individually. Investors can access large scale residential property developments and attractive returns without the stresses and uncertainties of doing it themselves. For more information go to: www.oliverhumepf.com.au 澳利富产集团(Oliver Hume)公司是澳大利亚最出名的住宅房地产基金和不动产服务集团。60多年来,公司帮助业主和投资者实现他们的房地产和投资目标。澳利富产集团(Oliver Hume)房地产基金以高品质管理房地产开发项目,通过质量研究,以及广泛、彻底和严格的调查过程,实现高收益和高回报。通过对投资者及其资金进行聚集,公司可达到仅凭自己永远无法达到的规模。投资者也能够借此参与大规模住宅房地产开发并获取诱人的回报,且不会遇到自行投资所 面临的压力或意外。获取更多相关信息,请访问：www. oliverhumepf.com.au