Demand v supply outlook
The Housing Crisis: Build Smarter, Not Just Taller
Another brief post this week.
This one follows on from my population post and dwelling starts outlook missives earlier this month.
Several peeps, including Tony, Ryan, Sam, Rayne, Elizabeth and Jake, to mention a few asked me to compare potential underlying demand for new homes versus possible supply.
So that this what I have done this post.
My demand figures are based on the average number of adults per dwelling type not total residents, as most children live with an adult. Some 22% of Australian residents are aged under 18 years and their correct statistical treatment when it comes to housing demand is important.
In short, we need to build more homes than most economists, government folk and pollies.
Also, I have used recent accommodation trends – which vary considerably from state to state – to help determine housing preferences i.e. detached and attached dwelling types over the next couple of years.
In general, we don’t have enough detached housing coming through and in broad terms way we are relying way too much on apartments. Apartments are very hard to make stack up these days, with around 60% across the country, whilst approved, are not getting built.
Some 95% of approved detached homes are built and often in a timely fashion. This factors in recent building company failures. Pre Covid the fall over rate for detached homes was only a couple of percent.
Australian’s want freehold title, a home they can improve, a nexus to the ground with a yard (even if it is small) and room to raise their kids, keep a pet/s and/or all their stuff. We like our cars and weekend toys too and they need to fit somewhere.
I am not anti-apartments or against other types of medium density housing solutions. Far from it. But building up isn’t the housing panacea that many think it is.
If we are going to really crack housing supply – we need to do five things - we need to change what we build, how we build them, where they are built, how we finance them and who owns the land.
Australia needs to leap into the 21st Century when it comes to new housing types and construction methods and stop harking back to yesteryear.
The status quo needs to change and big time. If not, then little happen.
I don’t know about you, but I am sick to the stomach hearing platitudes about this topic.
Whoever is in authority fix it or buzz off! (That’s me being nice)
PS And more about my five things soon. There is a strategy, and I hope a big announcement behind my timing. I am (finally) putting money where my mouth is. Watch this space.
PPS Some think that the South Australian, and even Western Australia’s, potential new housing supply levels are too high. On that note, John wrote to me last week and said…
“ I think your estimates for South Australia are a little optimistic. My reasoning for this is because the industry is having a massive problem right now and for the next 18 months in creating new allotments, particularly in northern Adelaide. This will result in a drop in the number of houses being able to be built. It’s all due to SAWater not having trunk water and sewer infrastructure in place to deal with demand. Most of the new infrastructure ($1.5B to be spent up until 2028) that the Premier’s Housing Roadmap announced in July 2024 will come on stream in 2027. And no one can make apartment projects stack up unless they are for high end customers or have big government subsidies. “
I agree and also this situation applies across the whole country. For example in Victoria, I read over the weekend, the government will be slowing down mid-rise apartment building across Melbourne’s middle ring suburbs. This will even apply adjacent to railway stations.
Such limitations on new housing supply further adds support for my five things.