Australia has very low new housing supply, while demand is at an all-time high, according to recent data from the Urban Development Institute of Australia (UDIA).
Housing supply drops even with high demand, as the latest UDIA Housing Index data for the June quarter confirms this trend.
Supply continues to lag behind demand for both sale and rental homes, which drives prices higher for buyers.
Consequently, this situation increases pressure on first-home buyers attempting to enter the market amid rising costs.
The report thoroughly examines the current state of Australia’s new housing market, providing key indicators of demand, supply, and costs nationwide.
Additionally, UDIA National President Col Dutton stated that the Housing Index figures show demand for housing increased over the last three months.
However, housing supply remains at a near-decade low, with all areas reporting decreased supply or only slight improvements overall.
Supply continues to languish at historically low levels, with the UHI Supply Sub-Index for the June Quarter at 88 index points.
This index places the national housing market in a ‘weak performance band,’ which UDIA considers alarmingly low, being 12% below average.
Furthermore, it is 21% below peak performance, indicating a significant shortfall in housing supply to meet current demand.
Eleanor Creagh, Senior Economist at PropTrack, noted that the supply side of the housing market has failed to respond adequately.
Consequently, building activity is at decade-low levels, which exacerbates the ongoing housing supply shortage across the country.
This imbalance between supply and demand offsets the impact of higher interest rates and worsened affordability, likely continuing in the future.
The UHI confirms that the national housing market remains severely impacted by high costs, which suppresses overall supply levels.
Moreover, this situation is intensified by ongoing softness in dwelling approvals and dwelling commencements, limiting new construction opportunities.
Cameron Kusher, Director of Economic Research at PropTrack, mentioned that high interest rates and construction costs are key factors in low volumes.
Thus, it is likely that low levels of new housing construction will persist, further affecting the housing market moving forward.
While inflation in construction material prices has slowed, construction costs are rising once more with no significant reduction in sight.
In this challenging environment, project viability remains a concern, limiting expectations for a turnaround in supply over the next quarters.
The June UHI Demand Sub-Index indicates that increasing demand results primarily from an uptick in owner-occupier mortgage lending and population growth.
Specifically, the index increased 6.7% in the June Quarter, reaching 127 points, the highest level recorded in nearly a decade.
Additionally, this figure is now 26% above the long-run average, highlighting strong demand amidst constrained supply conditions.
Mr. Dutton emphasized that the UDIA Housing Index shows extremely challenging housing market conditions necessitate government action across the nation.
Moreover, he stated that collaboration with the residential development sector is essential to unlock new dwelling supply more quickly.
Ultimately, addressing these issues is crucial to boost new housing capacity and better meet the needs of potential buyers.
