Housing crisis intensifying as NSW struggles to deliver desperately needed new homes
The Reserve Bank’s first hike since 2023 has squeezed borrowers and clouded the outlook for prices, but an industry leader says stalled housing delivery and investor exits, particularly in New South Wales, are the bigger threats to affordability.
The first Reserve Bank meeting of the year delivered an outcome no mortgage holder wanted. The first rate rise since 2023 will have an impact on many households already doing it tough.
What it means for property prices remains to be seen. A rise in rates would ordinarily be expected to lead to slowing price growth, or even prices easing, as borrowing capacity for buyers is reduced. But this is not a normal market.
The Federal Government’s plan to build our way out of the housing crisis is not coming to fruition.
According to the Australian Bureau of Statistics, nationally there were 186,000 approvals for new homes in the 2024-2025 financial year, the first 12 months of the National Housing Accord.
This is 54,000 short of the Accord annual target and the lack of contribution from New South Wales, the nation’s biggest market, is a problem.
NSW needs housing policy revamp
Part of that problem is confused NSW Government policy.
Releasing land for housing and enacting rezonings in key areas well-serviced by transport and amenity is prudent. But on the other hand, policies that discourage residential investment, tax settings that make construction too costly, and the stamp duty burden faced by purchasers, is counteracting the potential for positive momentum.
The NSW Government has the opportunity to listen to the data but continues to be unwilling to do so. The Real Estate Institute of NSW will continue to call for common sense to prevail. Renters, especially, deserve to have their circumstances considered.
As the new year gets underway, the situation for renters in NSW is dire and unfortunately, it’s getting worse.
Investors are exiting the market, putting additional strain on vacancy rates that are already at dangerous lows. Demand is continuing to increase and new housing delivery is unable to keep up. Rents are rising considerably faster than wages.
The perfect storm that had been brewing is now wreaking the havoc we feared it would. We need to turn our attention to solutions.
How do we encourage investors back into the market so they can provide more options for renters? A good start would be to walk back the recent reforms that demonise landlords and limit the control they have over their property.
Another would be to shift the focus of support to those we expect to deliver new housing.
People bemoan developer profits but ignore the fact developers take significant risk. Until project feasibility begins to stack up, the new supply we need will remain stalled.
So much doom and gloom, but all is not lost and for investors.
With the exception of some volatile, resource-driven regional economies, strong tenant demand is essentially a given in the short-to-medium term. Transactions are steady and listing numbers have now increased following the festive break.
So, there will be opportunities, especially if the rate rise delivers on its potential effect of taking some of the heat out of property prices.
