Delving into Australia’s housing crisis, the alarmingly low vacancy rate of 0.7% serves as a stark indicator of the situation.
A balanced housing market would exhibit a vacancy rate between 2-3%, suggesting a significant shortfall in available housing. This “unprecedented low” highlights a severe, ongoing undersupply in the market.
The surge in demand is primarily fuelled by robust population growth, notably driven by net overseas migration, which reached a staggering +517,000 in the year leading up to June 2023. This figure, combined with natural population growth of approximately 90,000-100,000 annually, underscores the pressing need for housing. The current migration rate is a significant leap from the pre-COVID average of 217,000, further exacerbating the supply issue.
The gap between housing demand and supply is widening, with the Federal Government indicating a need for an additional1.2 million dwellings over the next five years merely to keep pace with demand. However, projections for 2024 suggest the construction of only 160,000 new dwellings, falling short of the annual target of 240,000.
CBRE’s estimate that 300,000 new apartments are needed within four years to meet demand further illustrates the challenge. With current production rates lagging, the shortfall in housing supply is expected to worsen before improvements are seen.
This imbalance between supply and demand is stabilising property prices, even amid rising interest rates and affordability concerns. The market is witnessing price escalations, defying predictions of a crash due to rate hikes. Detached dwellings, in particular, have seen their premium over apartments jump from 16% pre-COVID to 45%, highlighting the growing affordability gap.
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