Property prices, rents to soar as housing shortage hits 500,000 in 2020

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Growth in property prices may be easing in the short term, but investors are poised to reap big gains over the next 10 years as the housing shortage continues to worsen according to a new report.

The Housing Industry Association (HIA) estimates that by 2020, taking into account the current population projections and home building trends, Australia will see a cumulated housing shortage of 466,000.

"If we don't get a comprehensive supply response to the accumulating housing shortage, then the lack of affordable and appropriately located rental properties will only worsen, while pressures on existing home prices will continue at an undesirable rate, placing avoidable upward pressure on interest rates," Ben Phillips, senior economist with HIA.

Rents are also expected to sky rocket as a result of this chronic undersupply. Over the last two financial years, rents have grown across Australian capital cities by 14.2% or about 10% higher than the cost of living according to HIA.

Phillips noted that the $90 billion worth of resource projects on the books is expected to demand an additional 136,000 direct and indirect jobs, placing further constraints to the low housing supply, supply of labour and materials in non-resource regions.

The report found that the most severe undersupply is found in and around Sydney and Brisbane, but it also occurs in just under half (295) of the 669 Local Government Areas across Australia.

"Many of the LGAs with the largest housing shortage are also the same regions with the highest level of demand. Again, it's the growth areas in the greater Sydney area and in South East Queensland where demand will be among the highest in the nation," said Phillips.

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