Australian housing crisis to be hit by 106,000 shortage

It showed that there will be a shortage of 106,000 homes by 2027 across Australia as a result of skyrocketing interest rates, soaring immigration, a lack of building and community opposition to development, according to The National Housing Finance and Investment Corporation (NHFIC).

It forecasts that in Brisbane alone – which is gearing up to host the Olympics in 2032 – there will be a shortfall of 12,300 homes within five years, while Sydney will be lacking more than 10,000 homes.

Perth is predicted to record the biggest shortfall of 25,200 dwellings by 2027.

While around 148,500 new dwellings are expected to come on to the market in the 2022-2023 financial year, this will drop to 127,500 in new construction in 2024-2025.

“Over the three years to 2024-25, NHFIC expects an average of 138,100 net new additions to be added to Australia’s housing stock. This is well below the 180,000 average each year forecast in last year’s report for the same period,” the report warned.

It expects just 57,000 homes a year to be built over the next five years, 40 per cent down on levels experienced in the late 2010s.

Meanwhile, the Centre for Population predicts net overseas migration to increase by 268,000 between 2022 and 2024, with recent data suggesting this could be considerably higher – adding to the pain already felt in the housing market.

“The rapid return of overseas migration, together with a supply pipeline constrained by decade-high construction costs and significant increases in interest rates, is exacerbating an already tight rental market,” NHFIC CEO Nathan Dal Bon said.

“NHFIC analysis shows housing affordability and supply are likely to remain challenging for some time, underscoring the need for a holistic approach to mitigate the housing pressures Australians are facing.”

The country is already facing terrible housing conditions, with rental vacancies sitting below 1 per cent, a construction sector in crisis with major players collapsing and costs soaring, while bad weather has also contributed to the delay in building of up to 28,000 homes last year.

The report estimated around 377,600 households are in need, including 331,000 in rental stress and 46,500 who are experiencing homelessness.

On Friday, Australia’s 13th largest home builder Porter Davis Homes collapsed suddenly placing 1700 projects in jeopardy across Victoria and Queensland, while another major construction firm also went under.

It comes as the construction industry is at crisis point, as companies are failing at nearly double the pace of last year, with nearly 1500 building firms having failed since June 30, according to ASIC data.

The problem has also been exacerbated by changes brought on by the pandemic, with 341,500 extra households created since mid-2021 as people moved out of sharehouses or family homes to be on their own.

Yet, there is little relief in sight as the Federal Government is struggling to find support in the Senate for its $10 billion Housing Australia Future Fund.

Experts have wanted the Government is set to fall well short of its goal of building one million homes over five years.

Tim Reardon, Housing Industry Association chief economist, said the report highlighted that the under-supply of housing is set to worsen as demand continues to outpace supply.

“Every state and territory need to take action to attract more investment in the housing sector to improve the supply of new homes,” he said.

“The NHFIC Report expects around 180,000 new households to form each year, but less than 150,000 new homes to commence construction each year for the next two years.

“Over the decade, this will see an expected 79,300 shortfall in the supply of new homes.

“This will see the acute rental shortage worsening and unnecessarily high increases in home prices.”

Mr Reardon said the report showed that to meet the accelerated demand for new homes, there needs to be an increase in the number of apartments commencing construction.

“Commencements of apartments last year were 40 per cent lower than at their peak in 2016,” he noted.

“The imposition of a range of punitive taxes on investors by state governments, combined with additional constraints through the FIRB and diplomatic disputes, has seen investors withdraw from the market.

“At the same time, the cost of new apartments is set to increase in 2023 with new regulatory costs imposed through building regulations.

“These regulatory costs are in addition to the increased cost of labour and materials that increased rapidly over the last two years.

“The combination of increased costs and less investment has seen apartment construction slow well below what is needed in a typical year of population growth. But with migration expected to be at record levels in 2023, the shortage of housing will continue to deteriorate.”