‘Alarmingly low’: Housing supply hits shocking lows despite record-high demand
Australia is experiencing alarmingly low levels of supply of new housing, while demand sits at record highs, according to the latest data from the Urban Development Institute of Australia (UDIA).
The latest UDIA Housing Index data for the June quarter confirms that supply continues to lag behind demand for both sale and rental homes, driving prices higher and increasing pressure on first-home buyers attempting to enter the market.
The report looks at the state of the new build Australian housing market, providing indicators of changes in demand, supply and costs for new residential properties across the nation.
“The UDIA Housing Index (UHI) figures show that across Australia, demand for housing increased over the three months since the last UHI report. Demand now sits at record highs, while housing supply remains at near a decade low with all jurisdictions recording either decreased supply or only marginal improvements,” UDIA National President Col Dutton said.
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Building approvals remain low, meaning there aren’t enough new homes to satisfy or ease demand, exacerbating the housing supply shortage across the board. Picture: Getty
Supply continues to languish at historically low levels of activity with the UHI Supply Sub-Index for the June Quarter recording the national housing market in a ‘weak performance band’ of 88 index points, which UDIA considers “alarmingly low” – 12% below the long run average and 21% below peak performance.
“The supply side of the housing market has fallen short in responding to substantial demand. Building activity is at decade low levels, exacerbating the housing supply shortage,” said Eleanor Creagh, Senior Economist, PropTrack.
“This imbalance between supply and demand has offset the higher interest rate environment and deterioration in affordability and is expected to continue to do so fuelling further price rises.”
The UHI confirms the national housing market continues to be severely impacted by very high costs, which is acting to suppress supply levels, intensified by the ongoing softness of dwelling approvals and dwelling commencements.
“High interest rates and high construction costs are likely to see low volumes of new housing construction persist,” said Cameron Kusher, Director of Economic research at PropTrack.
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“While inflation in the price of construction materials has slowed, construction costs are rising once more and there is little prospect of any significant reduction in construction costs.”
In this environment, project viability remains a challenge, and as a result there is limited expectation of signs of a turnaround in supply over the coming two quarters.
The June UHI Demand Sub-Index found increasing demand is primarily a result of an uptick in owner-occupier mortgage lending and historically high population growth rates.
It increased 6.7% in the June Quarter to 127 points, which is the highest level recorded in almost a decade and now 26% above the long run average.
“The UDIA Housing Index shows that extremely challenging housing market conditions underscore the need for governments across the nation to work with the residential development sector on solutions to unlock new dwelling supply faster and boost new housing capacity,” said Mr Dutton.