The most recent Housing Industry Association (HIA) report suggests that if Australia’s population continues its current growth spurt at 1.6 per cent per year, and if household incomes remain sluggish, building an average of about 215,123 houses per year until 2050 would be required to meet the supply and demand.
In other words, if Australia’s population stays on its current population growth course, it will not be able to strike a balance between supply and demand over the next 32 years. The HIA Housing Australia’s Future 2018 report asserts that this poses a “major problem for policymakers” since the existing supply of accessible building blocks in the nation are inadequate to support this kind of growth. Inevitably, it will cause a significant rise in property costs and the cost of building new houses.
If Australia’s income growth escalates to the current 30-year average of 3.1 per cent (above the average of 0.7 per cent in the previous three years leading up to December 2017), and the population keeps growing at its current pace, the HIA estimates that building 232,489 houses would be necessary to adapt to the growth and the ageing population.
According to the HIA, the number of houses to be built increases to 249,855 when you combine the current population growth with the prospective growth rate of 5 per cent, which is just a bit lower than the 5.1 average that occurred during Australia’s biggest boom over a decade ago.
On the other hand, if wages keep floating at the current trajectory and the population growth decreases to a yearly average of 1.3 per cent, the number of houses to be built would be 167,041 until 2050. A one per cent population increase per year would require 131,371 houses per year over the same time frame of 32 years.
The HIA reports that if the income growth goes up by 3.1 per cent and the yearly population growth rate falls to 1.3 per cent, 184,407 houses would be required to meet this growth expectation up to 2050. A one per cent population growth would spur the need for 148,737 dwellings each year to balance that trajectory’s supply and demand.
High income growth of 5 per cent each year and an average population increase of 1.3 per cent would create the need for 201,773 houses each year until 2050, which decreases to 166,103 if you assume only a one per cent population boost per year.
Current Supply and Demand Ratio at Closest Balance in Over 10 Years
The HIA report says that the rapid property price increases is likely caused by the continuing supply and demand imbalance that has been going on since between 2002 and 2003, which resulted in Australia’s current housing affordability crisis.
The residential housing industry stated that 2017 and 2018 (so far) are at the closest to a supply and demand balance in about 15 years at the national level. New constructions across Australia came to more than 217,000 in 2017.
The HIA report emphasised, “We recognise that the extraordinary volume of new commencements has ensured that, for the first time since 2003, the number of dwelling commencements in Australia is effectively fulfilling the needs of Australia’s growing population.”
Consequently, this state of balance is not steady across the country, with property markets in the Northern Territory and Western Australia that experienced substantial construction reductions in recent years because of local economic issues.
An analysis of a Digital Finance Analytics (DFA) Household Survey by finder.com.au asserted that around 51,500 borrowers may be at risk of defaulting on their home loans and mortgages over the coming year. Thirty per cent of Australians are currently experiencing mortgage stress.
DFA principal, Martin North says that “at risk” borrowers were ultimately higher in mining regions across Western Australia and Queensland. That major mortgage stress could occur around the nation.
Martin North asserts, “There are more people currently at risk in Western Australia and in Queensland, which is an outfall from the mining downturn, but we’re also seeing a significant rise in severe stress in Western Sydney, on the outskirts of Melbourne and around Brisbane.”
Mr. North stated, “Defaults over the next two years are not necessarily going to be centred in the West or in Queensland, but we’re going to see some more significant risks in and around the main urban centres in Brisbane and Melbourne.”
The DFA principal attributes the higher risk of mortgage defaults to the slow wage growth, high mortgage repayment costs for those who obtained loans before the stricter loan policies were enacted, and high pressures of the cost of living.
First Choice Mortgage Brokers are a Sydney Mortgage Broker operating under the Australian Credit Licence Number: 382370