Is There A Housing Shortage In Australia?

There is raging debate on whether Australia is experiencing a housing shortage. The construction industry and real estate professionals argue that there is a critical shortage, while non-aligned organizations such as Prosper Australia disputes the claim.

The arguments for an existing shortage
According to the most recent report on Australian Performance of Construction Index (Australian PCI)from the Housing Industry Association (HIA), a shortage in quality housing continues to be an issue with a 45.9 points reading in April this year. Readings below 50 is an indication that there is a decrease in building activity. If this condition continues, the HIA foresees that the aggregate housing shortage in Australia will hit 466,000 dwellings by 2020.

• Housing growth not commensurate to population growth

An argument that advances this claim is coming from a Bloomberg article which cited a Commonwealth Bank Report that stated that based on an ABS Australian Demographic Statistics Sep 2013 the estimated annual growth of the Australian population over the last ten years is1.6%. This translates to an annual housing demand of approximately 170,000 dwellings, but supply is only 154,000. This means that Australia has not been building homes at an equal rate to the growth of its population.
This claim is further supported by an ANZ Bank forecast of a 270,000 shortfall, corresponding to almost 20 months of housing construction. The shortfall increase is predicted to reach 370,000 by 2015.

• High house price spurred by a critical shortage

A lot of financial and economic analysts allege that the critical shortage of dwellings in Australia caused the increase in house prices. They also argue that the shortage is due to the restrictions on land rezoning in the outskirt of major cities plus policies that obligate property developers to pay for the cost of electricity, road, sewage and delivering water to new housing developments.
According to the Telegraphthe housing market of Australia is the 5^th most overvalued market out of countries in the Organization for Economic Cooperation and Development (OECD). This is corroborated by an SMH report that the “$4 trillion Australian housing market is now overvalued by at least 10 per cent.”

The arguments for the lack of shortage

Prosper Australia claims that there is no housing shortage in Australia, particularly in Melbourne. This claim is based on anEarthsharing report that between January and June 2009, at the time of the supposed rental and housing crisis, there were 44,753 vacant homes in the South-Eastern, Western and Inner suburbs of Melbourne. This is equal to almost 6.9% of the housing supply in Melbourne, which is a far cry from the 1.4% rental vacancies as reported by the Real Estate Institute of Victoria. Earthsharing is a related group of Prosper Australia.

The non-government organization concludes that there is no housing shortage in Melbourne, on the contrary, there is a housing bubble resulting from land speculation. It is the landlords’ unwillingness to lease their homes that has created the rental crisis. These are “speculative vacancies,” homes kept out from the market to stimulate increase in prices and make a killing on capital gains.

An APM Rental report indicated that Melbourne unit rents persist on a quarterly downward trend of -2.8% and no increase have been recorded during the year. According to those who maintain that there is no housing shortage, this report confirms their claim that there is no housing shortage.