[Podcast] A leading economist’s view on the Budget’s property initiatives and a housing market update, with Dr Andrew Wilson

If you’re a tenant in the market for accommodation, good luck finding something to rent.

And if you’re a home buyer or investor, by now you’d realise the market is on the move again.

Today I chat with Dr Andrew Wilson, Australia’s leading housing economist and we discuss his thoughts about the Federal Budget and if it offered any relief for our housing markets.

We also discuss the rental markets, building approval numbers as well as the booming auction clearance results.

The Federal Budget and our housing markets

The Budget offered little relief for private sector housing markets currently experiencing rising home prices and skyrocketing rents.

Government initiatives targeted increased public housing, small rises in rent assistance for welfare recipients, some minor incentives for build-to-rent projects and an extension to eligibility for Home Guarantee Scheme

Is Build to Rent the answer?

The recent Federal Budget announced tax incentives to promote institutions investing in the nascent Build to Rent (BTR) sector.

It’s possible we could see up to 150,000 new BTR apartments delivered over the next decade, about two-thirds of which will likely be in Melbourne.

Build-to-rent apartment projects are designed and built by a developer who retains ownership of the building when it is complete, and the units must offer a guaranteed lease period of at least three years for those seeking security of tenure.

The BTR concept is relatively new to the Australian housing scene and the largest institutional developer of them in Australia, Mirvac, has only two completed BTR buildings current experience suggests that rents in these complexes will be around 25 per cent more expensive than what's currently available on the open market.

So this initiative is not going to deliver large-scale affordable accommodation in the short term.

Home Building

In today’s show, we also discuss how we’re just not building sufficient accommodation for the skyrocketing demand.

Monthly home building approvals were lower by 0.2% over March seasonally adjusted with houses down by 2.8% but volatile units up 5.6%.

Total approvals remain 18.3% lower this year so far compared to the same period in 2022.

Brisbane has been the top performer over the past year up by 9.7% however other capitals have fallen significantly with Sydney down 40%

Rents Still Rising Over April – Despite Holidays

It was another tough month for new tenants with rents continuing to rise despite higher vacancy rates reflecting the holiday distractions typical of April.

Most capitals reported increases in house rents over April, with Darwin the top performer up by 5.3%, Melbourne up 3.8% and Perth higher by 0.9%.

House rents for Hobart and Canberra fell again over the month – down by 2.2% and 1.4% respectively.

Darwin continues to report the highest weekly asking house rents at $748 per week with Melbourne still the most affordable at $545 per week – now just below Hobart at $548.

Reflecting April holiday distractions, house vacancy rates were higher in all capitals except Brisbane and Darwin where rates fell.

Despite the increases, vacancy rates remain generally at record low levels.

Most capitals continue to report extraordinary increases in house rents over the past year with Brisbane top performer up by 27.2%.

Hobart annual house rents however have increased by just 3.8% with Canberra down 2.9%.

The reason for the rental crisis goes way beyond migration

The housing crisis in Australia can be attributed to several key factors, but you’ll hear us explain the increased demand for space during the COVID-19 pandemic and a decline in average household size, and the resulting surge in demand for homes.

The Reserve Bank of Australia found that a one percentage point decline in average household size created 120,000 new households, all of which needed homes. This increased demand for housing put significant pressure on the market.

Links and Resources:

Michael Yardney

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Dr Andrew Wilson, Chief Economist My Housing Market

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