Housing undersupply and it's impact on the local property market

“A budget tells us what we can't afford, but it doesn't keep us from buying it.”
William Feather

For those of you who really like figures and statistics – you will get a kick out of this month’s article. The property market across the board could best be described as a ‘mixed bag’ with Western Australia and Melbourne going gangbusters whilst much of the remainder of the nation is still experiencing a general lack of demand and urgency from buyers. The Rainbow Beach market remains sluggish and although properties are still selling, we are still well below average sales volumes. As stated in our May article, we believe we have hit the bottom of this market cycle – the only question is – how long will the ‘bottom’ last?

National housing finance data recently released showed a further slowdown across the property market. On a seasonally adjusted basis, owner occupier finance commitments for: construction of new dwellings (-7.3%), purchase of new dwellings (-3.2%), purchase of established dwellings (-2.9%) and total owner occupier loans (-3.4%) all recorded falls during March 2010. Over the year to March 2010 only commitments for construction of new dwellings has increased, albeit by only a small percentage, 1.6%. Meanwhile, on an annual basis, finance for the purchase of new dwellings is down -21.7%, finance for established dwellings is down -26.0% and total owner occupier loans are down -23.3%. (Source: RP Data April 2010)

These figures represent the continued effects of the Global Financial Crisis despite an apparent recovery in the resource sector which seems to be taking its’ time in cheering up pessimistic and almost paranoid investors.

Again at the national level, the Federal Government’s National Housing Supply Council recently released their second State of Supply Report. Probably the most important finding of the 228 page document was the estimate that nationally there is a cumulative undersupply of 178,400 dwellings. The greatest undersupply in dwellings was found to be within New South Wales (57,600) and Queensland (56,100). The states with the smallest estimated shortfall in housing were found to be: South Australia (100) and Tasmania (1,000). See the graph below:

Source: RP Data April 2010

This data supports the view that Australia will face a major housing crisis in the very near future and raises the issue of further development as it is needed to meet the demand. Although environmental, community and social needs are important and should always be taken into consideration – it is evident that at some point – a compromise will need to be made.

South-east Queensland’s population is predicted to increase dramatically over the next 5-10 years and beyond through immigration, births and the aging population (ie. People are living longer and the number of births per year is greater than the number of deaths). This will place a huge amount of pressure on both the State Government and Local Councils to provide housing solutions for tens of thousands of Queenslanders. Infrastructure is vital to support this population growth and hand-in-hand with this is providing affordable, residential options for individuals and families are paramount.

What affect these housing undersupply issues will have on our local property market remains to be seen however it is certain that it will have an impact in the medium to long term. The pressure for further development in and around our region will also increase as a result of the resources boom as workers look for housing within a radius of centres such as Gladstone, Rockhampton, Bundaberg and Maryborough.