National shortage of property set to drive real estate prices higher
A national shortage of property in Australia is predicted to get worse and the ongoing gap between demand and supply is set to continue increasing, according to analysts.
All levels of government and the building industry are struggling to keep up with the country’s growing population and people are being locked out of the property market as a result.
Official figures suggest that the current shortfall is 100,000 and that is set to rise to 500,000 by 2029. Shortages are for both houses and apartments.
The property shortage is most critical in New South Wales, which accounts for almost one third of the nation’s total population but is contributing less than 20% of new homes and there is concern at senior official levels that Sydney is about to experience another debilitating price boom as rising demand coincides with inadequate stock.
The global financial crisis has added to the problem as property developers were squeezed for funds in 2008 and 2009. Indeed Australia is building fewer houses per head of population growth than at any time on record, according to new research from economist Saul Eslake.
Last year there were just 333 dwellings completed for every 1000 increase in population, less than half the rate that applied 10 years earlier, Eslake revealed.
Rising real estate prices are lock out first time buyers and lower income earners face rental stress as they are forced to compete with the middle class, and public services such as schools, hospitals and transport are stretched.
It is estimated that Australia’s population of 22 million will rise to 34 million by 2050. In the short term there are no signs that rising property prices are set to slow despite a rise in interest rates.
Indeed, according to Glenn Stevens, governor of the Reserve Bank of Australia, people should be worried about the property market and he warned that interest rates will rise. ‘I think it is a mistake to assume that a riskless, easy guaranteed way to prosperity is just to be leveraged up into property. It isn’t going to be that easy,’ he told the nation in an unprecedented television interview.
The RBA is concerned that momentum may be building in the property market, driving prices much higher. Stevens said it was not wise to leave interest rates right down at rock bottom any longer and people shouldn’t assume they’ll stay that low.