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Another reason we have an affordability crisis - featured image
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Another reason we have an affordability crisis

We're just not building enough dwellings and that's showing up as an affordability issue and a rental crisis.
 
Valuers Charter Keck Cramer conducted an interesting comparison of the total increase in private dwelling stock with the total population increase across various cities between Censuses.
They suggested a simple metric to assess the relative growth is to calculate the ratio of new dwellings per new person (capita) delivered over the last decade.
new dwellings
Of the Australian cities,
  • Sydney’s private dwelling stock increased by 353,287 dwellings and the population increased by 839,473 people (0.42 per capita),
  • Melbourne’s private dwelling stock increased by 407,857 dwellings and the population increased by 917,768 people (0.44 per capita),
  • Brisbane’s private dwelling stock increased by 187,568 dwellings and the population increased by 460,242 people (0.41 per capita) and
  • Perth’s private dwelling stock increased by 157,995 dwellings and the population increased by 387,780 people (0.41 per capita).
By way of contrast, the Canadian cities:
  • Toronto’s private dwelling stock increased by 314,746 dwellings and the population increased by 619,161 people (0.51 per capita),
  • Vancouver’s private dwelling stock increased by 154,967 dwellings and the population increased by 329,497 people (0.47 per capita),
  • Montreal’s private dwelling stock increased by 233,053 dwellings and the population increased by 357,654 people (0.65 per capita) and
  • Calgary’s private dwelling stock increased by 106,062 dwellings and the population increased by 266,967 people (0.4 per capita).
Several cities in both Australia and Canada are suffering major housing affordability problems.
Some of this could be alleviated by delivering more dwellings to accommodate the rapidly growing populations.
Charter Keck Kramer concluded that Australian cities are likely to experience greater affordability issues given they are building fewer dwellings per person than their Canadian counterparts

Maturity of apartment markets in Australian cities

Charter Keck Kramer also compared the relative maturity of the apartment markets in Australian cities to those in Canada, the USA and the UK.

They concluded that the apartment markets of Australian cities remain comparatively immature by way of comparison to many of these overseas cities.

Part of this explanation is the key role the greenfield (house and land) markets play in Australia however there is a noticeable trend towards higher density living which reflects a structural change in living preferences across Australia.

Between 2011-2021, the percentage of dwellings in the form of apartments:

  • in Sydney increased from 10.2% to 16.7%,
  • in Melbourne apartments increased from 3.3% to 7.7%,
  • in Brisbane, apartments increased from 2.9% to 6.8% and
  • in Perth, apartments increased from 2% to 3.3%.

 

apartment maturity

By way of comparison, between 2011-2021, the percentage of dwellings in the form of apartments in Toronto increased from 27.4% to 30.7% whilst in Vancouver apartments increased from 14.5% to 18.9%.

Furthermore, in cities in the USA of similar population sizes to Australian cities such as San Francisco apartments increased from 16.4% to 18.1% and in Seattle apartments increased from 13.8% to 17.4%.

Charter Keck Kramer explained that there is a large and important role for apartments (both Build to Sell and also now Build to Rent) to play in accommodating the growing populations of Australian cities.

Given the increase in house prices and the structural change in living preferences (trending towards both higher density living and also longer-term renting) the valuers anticipate that the role of apartments will become entrenched and pronounced over the next decade, and this presents significant opportunities for developers and investors who take a longer-term view of this segment of the housing market.

About Robert Chandra is a Property Strategist at Metropole and has an intrinsic understanding of property markets backed by many years of real estate experience. This coupled with several degrees gives him a holistic perspective with which he can diagnose clients’ circumstances and goals and formulate strategies to bridge the gap.
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