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24 Oct 2017

Supply is not the issue when it comes to the question of housing affordability

CLAIMS that a housing supply shortfall was to blame for high property prices are misleading, said Propertyology head of research, Simon Pressley.

Mr Pressley said some commentators had confused the strong performance of Sydney and Melbourne’s property markets with undersupply while dwellings approvals were at historic highs.

“While vested interest groups and some segments of the community will be quick to disagree with me, the evidence does not support those statements,” he said.

Mr Pressley analysed residential dwelling construction and population over two three-year periods and found national supply was already at record levels.

“Over the past three calendar years, 676,067 new residential dwellings were approved compared to 461,383 for the three years ending 2008,” he said.

Mr Pressley said Australia’s population growth over each of those three-year blocks was 1.063 million and 1.164 million, respectively.

“In other words, Australia’s population growth was about 100,000 less however, we approved 200,000 more dwellings,” he said.

Mr Pressley said strong house price growth in Sydney and Melbourne compared to other capitals was due to factors other than supply.

“The thing is, the stronger economy and consumer sentiment which comes with it — at a time when interest rates are at a record low — increases buyer activity to levels over and above the underlying demand of population growth,” he said.

“We only need to look at cities like Brisbane, Adelaide and Perth to see what can happen when consumer sentiment isn’t as strong while supply levels are high.”

Mr Pressley’s position is counter to other commentators who’ve claim a lack of supply had created elevated house prices.

The Urban Development Institute of Australia said supply continues to play a big part in keeping property affordable.

“Supply will continue to be the dominant factor in addressing housing affordability concerns and it is a positive move by the Government to tie State and local governments to housing targets through funding agreements,” according to the UDIA.

In the past, both Prime Minister Malcolm Turnbull and Federal Treasurer Scott Morrison have supported the idea that part of the solution to affordability was to remove impediments to housing supply.

 

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