The government is working to increase housing stock, but headwinds in the construction industry and rapid population growth may hamper plans to provide a quick solution to the housing crisis.
In last year’s budget, the government announced it would subsidize the construction of 1 million new homes over five years to improve housing levels to accommodate population growth and mitigate the housing crisis.
Further efforts to increase housing stock this year’s budgetThis includes additional incentives that will stimulate Australia’s construction rental sector, with the potential to add 150,000 new rental properties over the next decade.
But skyrocketing material and labor costs could delay construction of future developments, as a pipeline of record construction works has yet to break ground.
The government has promised to increase the housing stock within five to ten years.
And while these new homes will add to the real estate stock, they will still fall short of the number of properties needed to accommodate the growing population.
According to the Australian Bureau of Statistics, the population could reach 36.1 million by 2041, an increase of 9.7 million in less than 20 years.
As a result, the number of households is expected to increase by another 4 million households, exceeding 13 million households.
The total number of housing completed in the last 20 years is a staggering 3.4 million units, which is not so much considering the population increased by 6.5 million during the same period.
With the population outstripping the number of new homes being built, it is no wonder that the supply of housing for purchase and rental is so low, rental vacancy is so high, and property prices continue to rise.
Immigration is also recovering after the pandemic, with a record 106,000 net quarterly inflows of foreign immigrants in the September 2022 quarter.
And the Treasury Department estimates there will be an additional 650,000 immigrants to Australia’s population this year and next.
Therefore, 150,000 additional rental properties cannot cover the new immigrants arriving.
Immigration is making a strong comeback and the housing market will also be affected.Photo: Getty
Australia needs a significant increase in housing stock. However, the construction industry has faced many headwinds in recent years. The pandemic has brought many.
A long period of low interest rates and government subsidies to homebuilders created a huge demand for new real estate. However, multiple closures and supply chain issues during the pandemic have created a hold-up that will affect future development.
The latest data from the Australian Bureau of Statistics show that $54 billion of construction work is yet to be completed and $16 billion is yet to be started.
Nearly $70 billion in construction work was underway at the end of December 2022, up 56% from the pre-pandemic (March 2020 quarter).
Construction workers are overwhelmed by current developments, with fewer projects starting as $16 billion worth of construction is still waiting to start.
Private housing starts fell 21.9% year-on-year, down more than 5,000 units from the December 2021 quarter.
In addition, there are fewer construction companies in the market than they were before the pandemic, as many have succumbed to the pressures of the difficult environment.
There were 1,601 construction industry bankruptcies in the three quarters to March, a third of them in the first three months of 2023, according to the Australian Securities and Investments Commission.
And the construction industry is the hardest hit, accounting for 27% of bankruptcies so far this year.
This will affect the number of new housing approvals, which will drop by 17.3% in March 2023 compared to March last year, and has been trending downward since its peak in March 2021 due to the impact of subsidies for home builders.
Fewer approvals means fewer homes for buyers to purchase.
New developments on realestate.com.au are down 13% from their November 2020 peak. The number of properties available does not offer significant options for high market demand.
looking to the future
The government’s commitment to build more homes over the next 5-10 years requires a significant increase in new construction approvals and construction starts.
However, with fewer construction companies in the market and the remaining construction companies already overwhelmed by order backlogs and soaring material prices, the number of new approvals has already exceeded that of an additional 1 million homes and 150,000 rental properties. lower than without the promise.
Not only that, but even more of these homes are unlikely to meet housing demand.
The National Housing Finance and Investment Corporation said the number of new homes built over the next five years will be 106,300 short of what is needed to meet demand, including 62,300 fewer apartments than are needed. Predicting.