This article is from the Australian Property Journal archive
THE severe stock shortage fuelling the national housing crisis is poised to grow in 2024 and push prices higher, with Australians taking out fewer home loans as affordability constraints bite hard.
The latest data from the Australian Bureau of Statistics showed home lending fell 3.9% month-on-month to $25.12 billion in January. Owner occupier lending was down 4.6% to $15.91 billion (up 3.4% annually) and investor loans dipped 2.6% to $9.21 billion (18.5% higher than a year earlier).
First home buyer lending fell 6.9% in January. The largest fall was in NSW (by 8%) with Sydney’s housing affordability constraints a significant drag on demand, said senior economist for Oxford Economics Australia, Maree Kilroy.
She said the flow-through of the November rate hike contributed to the overall 5.2% decline in loans for the purchase of existing dwellings.
Canstar’s Steve Mickenbecker said the jostling in activity in recent months points to upgraders and downsizers holding out for rate cuts to maximise their borrowing power, while investors and first homebuyers battle it out for current market stock.
ANZ senior economist Adelaide Timbrell said, “The drop in sales volumes in December and January may signal further weakness in lending in the coming months, as may the fall in average loan size for owner occupiers”.
The average loan size dropped sharply in January for owner occupiers excluding first home buyers, by 4%.
The current outperformance of the Western Australia and South Australia property markets showed through in continued growth in average loan size, which is now on par for the two states at a record $530,000.
Ongoing house value growth continues to stretch affordability and put the dream of home ownership out of reach for a fast-growing cohort of Australians, while rents have surged and rental vacancies are sitting at historic lows.
Kilroy said buyer demand is keeping up with the lift in new listings, seeing property price growth sustained through the first few months of the year.
“While housing affordability is at a low point, record-breaking net overseas migration has added materially to underlying housing demand,” Kilroy said.
“Simultaneously, capacity constraints within the construction sector are holding back the delivery of new housing.”
There was a 3.2% drop in loans for the construction of dwellings in January.
Supply shortage to worsen
“The gap between incremental demand and supply is wide. We estimate a national dwelling stock shortage of 110,000 which is positioned to expand further. This will be the anchor for further price gains in 2024,” Kilroy said.
Official figures this week showed home approvals fell in January to a 12-year low. Oxford Economics Australia believes residential commencements are near the bottom of the cycle, with a trough of 153,700 expected for FY2024 – a fall of 11%.
The Albanese government has set in train billions’ of dollars’ worth of new housing builds. The National Housing Accord, struck with the states and territories, aims to deliver 1.2 million “well-located homes” across the country over five years from July, while the $10 billion Housing Australia Future Fund (HAFF) kicks off at the same time, aiming to deliver 30,000 new social and affordable homes. The HAFF is accompanied by the $2 billion Social Housing Accelerator, which aims to provide a further 4,000 social homes.
While critics of the HAFF say it doesn’t go far enough, some analysts, including Kilroy, say the targets are unrealistic in the first place, with contributing factors including higher interest rates, delays, and cost escalations pushing up new home prices and causing buyer anxiety, as well as planning lags.
Speaking at the National Property Club this week, Property Council of Australia CEO Mike Zorbas who used his address to slam “broken state planning systems” and government taxes as impediments to supply.
“I can tell you that there are housing ministers, planning ministers around this country who are sitting on development approvals right now that they could release very, very, easily and make a really material difference to supply, but it’s a very difficult and slow process,” Zorbas said.
Zorbas was debating Greens Spokesperson for Housing and Homelessness, Max Chandler-Mather who unveiled the party’s first policy for the next federal election in the form of a $27.9 billion public property developer that would deliver 610,000 homes over a decade.
The program would not be means-tested.
The Greens say there is a shortage of 750,000 public homes across the country.
Federal Treasurer Jim Chalmers dismissed the Greens’ proposal.
“I think this is consistent with how the Greens go about things. It’s easy enough for them to write press releases with big numbers attached to it,” he told reporters.
