A slowdown in new dwelling construction and record levels of overseas migration have induced a massive housing shortage across the country that is expected to prevail for at least the next four years.
BIS Shrapnel’s Outlook for the Australian Residential Housing Market report indicated that there was a shortfall of around 100,000 dwellings in June. The report anticipated this to double by 2016 on the back of unprecedented population increases brought about by overseas migration.
According to the report, net overseas migration between 2006 and 2012 was double that of figures for the preceding 10 years. In contrast, new dwelling completions fell over 2011, indicating that the population is increasingly squeezing into the existing dwelling stock.
As evidence of this, the report cited the low level of rental vacancy rates in a number of capital cities and regional areas, which has underpinned solid growth in rents in recent years.
As skill shortages in a number of industries become more acute, BIS Shrapnel forecasted overseas migration to increase and remain high, averaging at 1.7% annually until 2016.
At this rate of population growth, the report said that around 182,000 new dwellings will be required to be built each year. However, with new dwelling completions lagging the underlying demand, the national dwelling shortfall will almost double to around 200,000 dwellings in 2016.
Despite differences in the size of this undersupply across states, the report added that the rising shortage could result in rental pressure being maintained through much of the next five years. This would push more tenants and investors into the property market as the former sought refuge from rising rents and the latter sought to profit from higher yields. This, in turn, would fuel prices growth.
The tight rental market would have the additional effect of barring dispossessed home owners of an easy return to the rental market. “Pressures on the rental market will put a floor under rents, and consequently, house prices,” it said, adding that such an outcome would be unlikely given that the undersupply in dwellings would support moderate house price growth in the medium term.
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