Warning: Aussie Housing Shortage Ahead
New house approvals in Australia have hit their lowest point in almost 12 years, primarily due to increased borrowing and building costs, dissuading potential buyers in New South Wales (NSW) and Victoria.
The latest official data reveals a 9.6% month-on-month decline in January, resulting in a seasonally adjusted total of 7565 approvals for detached houses, the lowest since June 2012. The January total of 101,030 approvals on a rolling 12-month basis is the lowest in over a decade. Economists predict an imminent cyclical trough, with new housing starts also nearing their low. However, there are optimistic signs of improvement in development enquiries, land sales, and construction finance, especially for houses. Approvals for attached homes, such as apartments and townhouses, increased by 14.5% in January after a 22% decline the previous month. Despite the current downturn, some experts anticipate a rebound in approval volumes in the coming months, though a rapid recovery is unlikely, according to industry veteran Robert Lynch, the executive chairman of Tamawood, an ASX-listed home builder.
According to Robert Lynch, executive chairman of Tamawood, the housing market may have hit its lowest point, but a widespread industry recovery will take time due to high interest rates and industry-wide price increases. Lynch suggests that the sales revival will likely begin with more affordable houses, a niche where Tamawood specializes. He notes a shift in the market, with buyers opting for smaller dwellings due to affordability challenges, particularly in the middle-market segment. This adjustment has contributed to Tamawood's 17% revenue increase and a tripling of pretax profit in the first half. Despite the demand for smaller homes, experts warn that it may not be enough to meet the overall housing shortage, as total dwelling approvals remain below Australia's underlying requirements. Oxford Economics Australia's Maree Kilroy predicts a significant housing deficiency of around 110,000 dwellings, expecting this gap to widen in the coming years.
Source: https://www.afr.com/property/residential/the-housing-crisis-won-t-be-fixed-by-pretend-policies-20240304-p5f9sz