Need for housing affordability and supply plan confirmed in new report

The National Housing Finance & Investment Corporation’s (NHFIC) State of the Nation report confirms the need for a national plan for renters, first home buyers and owner occupiers as Australians build new households in the wake of the COVID-19 pandemic.

Real Estate Institute of Australia (REIA) President Hayden Groves said this report reiterated the need for Government to address supply as the main way to solve the affordability dilemma.

“It remains unknown to what extent supply chain crunches and labor shortages will affect productivity for new builds.

“NHFIC does note the impact supply constraints and associated cost increases will have on meeting expected demand growth. Should the impact be more acute or prolonged, the supply and demand gap will worsen,” Mr Groves said.

REIA believes with media reporting an anticipated receivership of ProBuild, this will no doubt weigh on consumers’ minds and challenge the assumptions within the projected forecast for new dwellings and houses.

“Household formation is across the board expected to exceed supply by 164,300 by 2024-25 after some short-term relief this year and next, which will maintain pressure on affordability, particularly as interest rates increase,” Mr Groves said.

“With these challenges a Federal and State Government plan for both housing supply and affordability is badly needed.”

Impact of COVID-19

NHFIC’s State of the Nation report also previews key impacts as Australians adapt and rebuild from the COVID-19 pandemic.

It shows net overseas migration will remain negative at -44,000 with the overall population outlook anticipated to be 1.5 million lower in 2031 than anticipated.

The growth in both single person households (35 per cent) and couple only households (29 per cent) hints towards increasing demand in unit or townhouse-based housing stock.

Mr Groves said both these trends would benefit from a plan, with little relief on the horizon for renters and first home buyers.

“Affordability for renters and first home buyers deteriorated across most cities and regions in 2021 (to September), except in Sydney and Melbourne, where aggregate rental affordability modestly improved. However, rental pressures have been building in these cities more recently and this situation is set to worsen in the short term as international border restrictions are relaxed.

“As with REIA’s Housing Affordability Report, the NHFIC report found that first home buyer affordability has deteriorated over the course of 2021 due to strong dwelling price growth.

“Average loan sizes have increased to $570,000 while the weighted average median house price for the eight capital cities increased to $961,059 over the year to September 2021.

“Sydney and Hobart remain the most unaffordable cities for first home buyers with the bottom 60 per cent of income earners able to afford less than 10 per cent of available properties in the market.

“All of these factors point for the need for a long-term plan and resourcing from all levels of government,” Mr Groves said.

Source - REIWA - 28/02/2022