David Scutt| The New Daily|10 April 2018
Australia’s population is about to tick over 24.9 million, and is growing at an annual pace of 1.6%, according to data from the ABS.
If that pace of growth is maintained over the next few decades, it will see Australia’s population rise to over 41.4 million by the year 2050, putting pressure on existing infrastructure, including housing.
At a time when housing affordability is already extremely low in many of Australia’s largest cities, it raises the question as to what needs to be done to prevent affordability from becoming worse.
It’s perhaps not all that surprising that Australia’s Housing Industry Association (HIA), the nation’s peak residential building, renovation and development industry body, thinks supplying new dwellings is a key factor to ensure affordability doesn’t fall to even lower levels.
Based on modelling conducted by the group, it has come up with a variety of scenarios to demonstrate what level of dwelling supply may be required to achieve an equilibrium between supply and demand looking ahead to 2050.
In short, it thinks we need a lot; especially if population growth maintains its current trajectory.
“If household income growth accelerates to the longer-term average rate [of 3% per annum], and Australia’s population growth slows to our ‘mid-range’ scenario [of 1.3% it suggests] Australia would need to build an average of 184,807 new dwellings per annum out to 2050 in order to successfully house our growing and ageing population,” the HIA says, pointing the table below showing its various scenarios.
“If the population growth remains at 1.6% and household incomes return to their long-term growth rate then the number of homes built each year will need to average 232,489.
“This would mean averaging a build rate over the next 33 years — equivalent to the strongest building boom year in Australia’s history back in 2016.”
Given the HIA’s forecasts, it says rather than tinkering with the tax system to help improve affordability, all layers of government need to work together to ensure there’s an adequate supply of land available to meet expected demand.
“The excessive cost of supplying new housing lies at the core of the affordability challenge,” says Tim Reardon, Principal Economist at the HIA.
“Housing affordability will not be solved by amending negative gearing, capital gains tax or imposing punitive charges on foreign investors.
“Such measures increase taxation on housing and further raise the cost of new supply, which is already excessive and inefficient.”
According to the latest HIA-CoreLogic Residential Land Report, the median cost of a vacant residential lot in Australia surged by 6.5% to $267,368 in the September quarter of last year, leaving it up 10.9% from a year earlier.
Australia’s capital city median rose even faster than the national average, lifting to a record high of $313,74, up 12.8% over the year.
In Sydney and Melbourne, Australia’s fastest growing capitals in terms of population size, median lot prices jumped by 10.3% and 33% respectively over the same period to $480,000 and $331,000.