Housing affordability, supply concerns at record high

Almost half of property professionals responded to a survey that housing supply and affordability are the most critical issues for the federal and state governments, a record high.

The latest ANZ/Property Council Survey of 744 property professionals in the June quarter has brought these issues into sharp focus, alongside the necessity to address them.

At the federal level, 48 per cent of respondents said housing supply and affordability are the most critical issues for the federal government, up 7 per cent year-on-year to a record high.

Similarly, at the state level, a record 49 per cent of respondents chose them as the most critical issues facing state governments, up 6 per cent from the previous year.

The level of concern was particularly high in NSW, where 57 per cent listed these issues as the most critical for the state, up 13 per cent since last year.

They were also the number one issues in the ACT for 52 per cent of respondents, the survey found.

This has come at a time when affordability for both buyers and tenants is deteriorating, according to the report.

“While housing affordability has been on a [declining trend] for decades, the strong rebound in immigration alongside very low levels of supply has exacerbated the issue,” it said.

Indeed, CoreLogic’s executive research director in the Asia-Pacific research division, Tim Lawless recently reported that the number of capital city homes advertised for sale is tracking about 26 per cent below the previous five-year average, while dwelling approvals continue to trend well below average levels.

“Low supply in the face of record net overseas migration and extremely tight rental conditions should be a key factor helping to offset the impact of higher interest rates,” he said, adding that despite rising rates, the under supply is likely to support housing values.

Government policy, structural failures blamed for issues

Following the release of the ANZ/Property Council survey, the property industry has renewed calls for the Australian federal and state governments to get planning systems fit for purpose to tackle the housing affordability and supply crisis.

Property Council chief executive Mike Zorbas said government policy and structural failures have ignited the current crisis, and called for greater ambition to retirement living and purpose-built student communities to better meet the needs of all Australians.

“You can’t bridge the housing affordability deficit without better planning and more supply,” Mr Zorbas said.

“Recent analysis shows that we are 1.3 million homes behind where we should be over the past 20 years and that a 10 per cent increase in supply would lead to a 25 per cent decrease in the cost of buying a home.

“State, territory, and local governments need to be accountable for increasing their run rate in providing housing across all market segments including social and affordable housing.”

Mr Zorbas continued that national housing and planning improvement targets are required, and called for the Australian government’s Future Fund to pass the Senate.

“We also need state parliaments to red-card proposals and taxes that penalise the investment in new stock. Maximising new supply in brownfields and greenfields areas is the only serious path to exerting downward pressure on the cost of buying and renting homes.

“Rent caps will exacerbate parliaments’ failures to plan well and provide enough homes. Caps will also knock off future investment in build-to-rent, purpose-built student accommodation and retirement living homes as they have begun to in the ACT,” he said.

Price growth expectations trend up

The survey of Property Council members also found that with expectations around future interest rate rises slowing down, housing price growth expectations have returned to positive territory for the first time in five quarters, reaching 29 points in the index. A score of zero is considered neutral.

However, ANZ senior economist Adelaide Timbrell flagged that rising rates and ongoing pricing pressures are still dampening confidence.

“While developer finance expectations and interest rate expectations improved, they are still very pessimistic,” Ms Timbrell said.

“We read the slight improvement in expectations as a product of nearing the end of the rate hiking cycle, rather than a fundamental change in expectations of policy from developers. We forecast that the RBA will raise the cash rate to a peak of 4.6 per cent in 2023, and we are unlikely to see a decline in the cash rate until late 2024.

“The price of materials will continue to be a challenge. Forty-eight per cent of respondents in the June quarter expected construction materials to rise over the next year by at least 5 per cent, up from 45 per cent in March. Less than 10 per cent of respondents expect construction materials to fall over the next year.

“The general trend is that demand is not an issue for developers, but the costs to fund, source materials and find labour for developments are still difficult. Considerable backlogs in construction will elongate the resilience of forward orders as the economy slows.”

Forward work expectations remained positive in every state and territory over the quarter, with an average index score of 30.8 across the country.

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