There are lots of different estimates of the supply and demand ratios of our housing markets. Many industry bodies suggest we have a significant housing shortfall.
I’m not so sure about that. In fact we have an oversupply in some areas and there are too many apartments coming onto the market in the CBD’s of Melbourne and Brisbane.
Having said that, Sydney’s undersupply of housing is forecast to double to 80,000 by 2014, according to the Urban Taskforce.
Now I often take industry estimates with a grain of salt (I’m not really sure where that expression came from) and lets be clear…the Urban Taskforce represents property developers.
However it is forecasting this undersupply on based on “NSW’s plummeting rate of building approvals”. And it is clear there is an underlying problem when in the case of NSW population growth is outstripping new supply.
NSW is currently producing less new housing than any other state or territory per head of population,
According to ABS statistics, during the June quarter Victoria approved 19,000 new homes, while NSW approved just 10,000.
Urban Taskforce chief executive Aaron Gadiel estimates a current 46,000-home deficit, up from a deficit of 36,000 homes in 2009.
Property values and rentals are driven by supply and demand and the lack of supply will push up property values and rentals. Even if builders turn on the taps it will take some time to have an effect.
Sure a house can be built on a block of land within 6 to 9 months, but what about all the apartments we require in Sydney to supply the growing demand for medium density living in the inner suburbs. Firstly councils are making new development difficult, then banks are making finance hard and to top it off, end values are not high enough to make new development feasible.
Maybe the Urban Taskforce is correct and there will be a sever shortfall after all. This must push up Sydney property values and rentals.
Bad news for tenants and new home buyers. Good news for investors who own well located investment properties.
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