Australian Property News

Supply of new homes still playing catch-up

Posted on Wednesday, March 17 2010 at 5:15 PM

An uptick in new home construction won't be enough to ward off Australia's housing shortage and a re-emerging affordability problem, Wakelin Property Advisory director Monique Wakelin says.

Builders started work on 40,000 homes in the December 2009 quarter, up 15 per cent seasonally adjusted over the previous three months, Australian Bureau of Statistics data shows.

Over the 2009 calendar year, building commencements rose 26 per cent.

But Wakelin says the December rise isn't enough to prevent Australia from sliding into a new housing affordability crisis.

"These numbers just show a last-minute dash by homebuyers to cash in on 2009's boosted grants – nothing more," she says.

"When you compare these dwellings commencement figures with the latest housing finance numbers a clearer picture emerges. For four straight months now, housing finance has been falling, which points to fewer new homes in 2010 and 2011."

Only 138,000 new dwellings were built in 2009, Wakelin says, not nearly enough to keep up with demand caused by population growth.

"(That figure is) down around 10 per cent from three years ago and around the same construction rate as the 1970s, when Australia's population increase was a quarter of what it will be in 2010," she says.

"Quite simply, Australian governments, federal, state and local, have shown themselves to be completely incapable of dealing with this problem. And the price of their failure is falling directly on homebuyers."

Real Estate Institute of Victoria chief executive Enzo Raimondo agrees there's a clear mismatch between supply and demand, and he says that's what has driven recent price increases.

Melbourne's rate of population growth has jumped 84 per cent in the past five years, Raimondo says, while dwelling commencements are up only 22 per cent.

"The significant increase in the number of dwellings commenced (in the December quarter) is very welcome and if it continues for the next few quarters it will have a beneficial impact on affordability and prices," he says.