The key word in real estate is shortage.
It was the key factor in the property price rises we have seen in the past year, in the face of multiple increases in interest rates.
And it’s going to get worse before we see any improvement.
Australia continues to build far too few new dwellings – and the forecast for 2024 is grim, from the viewpoint of addressing the shortages that are helping to drive up property prices and rents.
It’s predicted that home building will occur in 2024 at the slowest pace in more than a decade.
The Federal Government has set a goal to build 1.2 million new homes over the five years from 2024 – an average of 240,000 new homes each year – which is a rate of construction that has never before been achieved in Australia.
Currently the industry is falling well short of that target – and is likely to continue to do so, given that the building industry is blighted by shortages of everything, rising costs and building companies going broke week by week.
Investment and advisory group Jarden Australia says the government goal of 1.2 million homes is looking increasingly unlikely.
Jarden economist Carlos Cacho says: “Despite housing prices picking up again and despite the chronic undersupply of housing, we haven’t seen a pick-up in sales. On our numbers, we expect housing starts in calendar year 2024 to slow to about 155,000, which would be the lowest since 2012.”
So we need to build 240,000 to meet the Federal Government’s fanciful target, but the outcome his year is likely to be 155,000 new homes.
The higher cost of materials, land and finance are making it harder for developers to build dwellings profitably.
Jarden says Australia’s housing shortfall, expected to be at least 175,000 homes by 2027, reflects the failure to meet the key drivers of demand including smaller household sizes and the recent uplift in migration.
Extreme labour shortages have added to construction costs, delaying projects despite growing demand under-pinned by record-low vacancy rates and strong population growth.
The outcome is that we are likely to see sale prices and residential rents continuing to rise across Australia.
