Affordability still a problem despite record number of Sydney homes

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More than 30,000 homes were built in Sydney during the 2015-2016 financial year, yet experts say that this level of home building still is not enough to improve affordability in the city.

According to data from the Metropolitan Housing Monitor, a record number of 30,191 new houses and apartments were built in 2015-2016 – the most building activity since the 2000 Olympic Games. This resulted in a whopping 10% increase year-on-year. Most of these houses were concentrated in the City of Sydney, Blacktown, Camden, Parramatta, Liverpool, and The Hills.

Urban Development Institute of Australia chief executive Stephen Albin told Domain News that the supply surge was one of the most efficient steps to address affordability. But he also warned that the figures are “just meeting supply… we still need to eat into the 100,000 (undersupply).”

Since building approvals are at a 16-year high, the supply-side approach to affordability may not work as well as it would have in other market conditions. Forecasts from research house BIS Shrapnel revealed that home building in Sydney might have already peaked, possibly leading to a shortage of 37,200 homes by July 2017.

“On our forecast, in the next five years we will see little price growth. Affordability will improve but it’s a slow process,” said BIS Shrapnel managing director Robert Mellor.

“The quickest way to affordability to improve is for a substantial price correction, which is more than 10%, and I don’t think that’s going to happen.”

Domain Group chief economist Andrew Wilson also believes that the undersupply in the Sydney market will continue to push prices up.

“The Sydney market has been characterised by a chronic undersupply since the boom of the early 2000s and I think that Sydney will remain behind the eight-ball for the foreseeable future in terms of being undersupplied,” said Wilson.
 

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