Sunday, 9 April 2023

Australia's housing access & affordability crisis not going to ease in the near future


The estimated usual resident population of the NSW Northern Rivers region at the 2021 census was 311,177 men, women and children and the largest age cohort appears to be people aged between 55-69 years of age. 


These regional residents are living in est.143,846 freestanding houses, semi-detached town houses, units, flats, cabins and caravans.


From I July 2021 to January 2023 there have been a total of 2,137 new building approvals granted across the region. This represents a fall of -31 housing approvals compared to those granted from 1 July 2020 to 30 June 21. Most of these approvals appear to have been for free standing houses.


As of 4 April 2023 there are est. 700 properties on the regional rental market, with approximately half priced between $800 to $3,500 a week. In 2021 in Northern Rivers Region an estimated half of all households had incomes below $2,000 per week and only 13.1% of all households earned an income of $3,000 or more per week.


Housing markets are now at an inflection point. At a time of returning migration, they are contending with a perfect storm of high inflation and interest rates, slowing supply and record low vacancy rates.”

[State of the Nation’s Housing Report 2022–23, 3 April 2023]



Australian Government, National Housing Finance and Investment Corporation (NHFIC), 3 April 2023:


State of the Nation’s Housing Report 2022–23


Australia’s housing markets have been through an extraordinary period, impacted by COVID-19 related lockdowns, low population growth and record amounts of monetary and fiscal stimulus.


NHFIC modelling in the State of the Nation’s Housing 2022-23 suggests:


  • More than 1.8 million new households are expected to form across Australia from 2023 to 2033, taking total households to 12.6 million (up from 10.7 million in 2022). These households are expected to comprise around 1.7 million new occupied households and 116,000 vacant properties (e.g. holiday homes).


  • The much earlier increase in interest rates (relative to previous Reserve Bank of Australia guidance) is adversely impacting supply. NHFIC expects around 148,500 new dwellings (net of demolitions) to be delivered in 2022-23, before net new construction falls to 127,500 in 2024-25. A recovery in supply is expected after 2025-26 on the back of changing macroeconomic conditions and stronger underlying demand.


  • Slowing supply, together with increasing household formation is expected to lead to a supply household formation balance of around -106,300 dwellings (cumulative) over the 5 years to 2027 (and around -79,300 dwellings over the projection period 2023 to 2033).


  • From 2023 to 2032, household formation is expected to be dominated by lone person households (563,600 additional households), followed by couples with children households (533,300 additional households). Within 5 years, it is expected lone person households will be the fastest growing household type across the country.


  • NHFIC continues to expect a shortage of apartments and multi-density dwellings for rent over the medium-term. Net additions of apartments and medium-density dwellings such as town houses are projected to be around 57,000 a year (on average) over the 5 years to 2026-27, around 40% less than the levels seen in the late 2010s.


  • The premium for space at home, with ongoing work from home arrangements following the pandemic has contributed to reducing average household size. This has been a factor in sharply falling vacancy rates. Analysis shows that decreasing household size since mid-2021 led to an additional 341,500 households forming, or around 103,000 in net terms since the beginning of COVID-19.


  • NHFIC estimates that, conservatively, around 377,600 households are in housing need, comprising 331,000 households in rental stress and 46,500 households experiencing homelessness. Housing need across the country range from 208,200 households in highly acute rental stress to 577,400 households under less acute rental pressure.


Key findings:


  • Strong demand for housing coupled with tight supply of both labour and materials, and bad weather has put significant pressure on the construction industry. Approximately 28,000 dwellings were delayed in 2022. NHFIC’s industry consultation suggests builders are making cost allowances of up to 40% for unexpected delays, up from a more normal 20%.


  • In addition to higher interest rates, supply of new housing continues to be impeded by a range of factors including, the availability of serviced land, higher construction costs, ongoing community opposition to development and long lead times for delivering new supply.


  • Rental growth and rental affordability varied significantly across and within greater city and regional areas, with rental growth in regional areas now falling after a period of record demand. Rental growth in major cities such as Sydney and Melbourne are outpacing rental growth in regional NSW and Vic, which suggests the premium of living in large cities close to employment centres may be returning.


  • Rental affordability has varied greatly across the country during COVID-19. In Sydney, rents in several outer Local Government Areas (LGAs) increased more than 30% from early-2020 to January 2023 and more than 3 times that of some inner-city LGAs. Outcomes in Melbourne have been more subdued, with more than half of Melbourne’s LGAs experiencing rental increases of less than 10% since pre-pandemic. Southeast Qld has had the largest rental rises, with all 12 LGAs experiencing rental increases of 30% or more.


  • Trends in the macroeconomy can affect the ability of first home buyers to enter the market. Analysis shows that since the 1990s in Sydney, deposit hurdle rates (i.e. deposit as a percentage of income) on average increased by around 8% during an interest rate tightening cycle (-10% so far this cycle), compared with 26% during easing cycles. The average deposit required as a percentage of annual income has nearly doubled over this period from 60% to 110%.


Download the report

State of the Nation's Housing Report 2022-23 (pdf 3.75 MB) https://www.nhfic.gov.au/sites/default/files/2023-03/state_of_the_nations_housing_report_2022-23.pdf



In the detached market, in the 12 months to January 2023, average capital city price growth dropped to -4% after peaking at 23% in the last quarter of 2021.


Sydney and Melbourne were most impacted, with house prices falling around 15% and 11% respectively over the12 months to January 2023. House price growth was still relatively strong in Adelaide (6%) followed by Darwin (5%) and Perth (3%).


Detached house price growth in regional NSW, Vic, Qld, SA, WA and Tas outpaced growth in capital city areas of these states. The strongest regional price increase was in regional SA”

[State of the Nation’s Housing Report 2022–23, 3 April 2023]



According to the Reserve Bank of Australia, 16 March 2023:

 

The share of households that rent has risen over the past few decades, mainly in the eastern states. This reflects a rise in the proportion of private renters as home ownership rates have declined. The share of households in public housing has also declined, as growth in public housing stock has not kept pace with growth in the total number of households. Rent assistance to private tenants has also become a more common way of providing housing assistance to lower income households……


The average and median incomes of renter households are generally lower than owner-occupiers across age groups.... However, the share of private renters who are in the top half of the income distribution has risen over time as the share of private renters in higher paid jobs, such as professional services, has increased. This shift has coincided with an increase in the average age of first home buyers and a decline in the home ownership rate among younger households…..


Renters, especially those on lower incomes, tend to spend a larger proportion of their incomes on basic living expenses and have less spare cash flow (i.e. income available to spend on discretionary consumption or save), relative to those who have a mortgage. Renters also tend to have lower savings buffers. In combination, these factors can make renters more vulnerable to increases in the cost of living and make it more difficult for these households to accumulate wealth over time, compared with owner-occupiers….


Nearly 90 per cent of all households in the lowest wealth quintile were renters in 2019/20. This in part reflects that renters tend to be younger than other types of households and so have had less opportunity to accumulate savings over time. However, renters also tend to have lower wealth compared with owner-occupier households even after controlling for age and income....


The Australian Bureau of Statistics Monthly Consumer Price Index (CPI) showed that Rent CPI stood at 1.0% in April 2022 and had risen to 1.6% by May - then risen again in July to 2.0%, August 2.4%, September 2.9% & December 4.1%. 


The start of a new year saw the Rent CPI at 4.8% in January & February 2023. The next release of monthly CPI data occurs on 26 April 2023.


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