The latest house price trends
Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said on Thursday that Australia's homebuilding industry is facing a "perfect storm"!
Mr Hunt warned that Australians would face long-term house price and rent increases as population growth from net overseas migration outpaced housing construction.
"Australia's population is generally growing faster than other advanced economies. Population growth clearly means that the potential demand for housing rises over time – all those extra people need a place to live. ”
"Demand growth is far outstripping supply at the moment" and estimates potential housing demand is between 260,000 and 320,000 units per year.
Since the increase in net overseas migration in 2005, the Australian housing market has experienced a structural undersupply for most of the period.
The Reserve Bank of Australia's estimate of potential demand is also much higher than the conclusions of the National Housing Supply and Affordability Commission (NHSAC) in its State of the Housing System 2024 report.
NHSAC estimates that the current potential demand is about 230,000, after which it will drop to about 174,000.
The imbalance between housing demand and supply has led to a decline in rental vacancy rates and pushed up rental inflation.
She also noted that "activities have been greatly limited over the past few years. Materials, fixtures and fittings, and skilled labor are in short supply, and transportation delays have significantly extended construction time."
"The sector is currently facing weakening demand – housing approvals per capita are at their lowest level in a decade. In other words, some market participants have postponed the project or decided not to start because the construction costs are relatively high compared to the return on the project."
Mr Hunt said costs had "risen sharply and are not expected to fall sharply".
"Pandemic-related supply chain disruptions and competition for resources from other types of construction have driven prices up significantly, rising nearly 40% since late 2019."
To make matters worse, "many residential construction projects are financed through debt, so higher interest costs will inhibit the flow of new housing supply." ”
As a result, the RBA predicts that the housing construction slump will persist for some time.
In turn, Hunt said the housing crisis in Australia would continue: "Demand pressures and upward pressures on rents and prices will persist until new supply emerges".
Australian house prices have risen much faster than wages over the past decade or so, making it more difficult for potential homebuyers to complete their home buying plans unless they are willing to take on huge debts or get help from their families.
And this is likely to get worse.
Demand for housing has outpaced the rate of new home construction, while rising interest rates over the past two years have also boosted buyers' budgets.
At the same time, the recent pick-up in wage growth shows signs of peaking, but at a slower pace than house price growth.
Data from the Australian Bureau of Statistics (ABS) this week showed that wages rose by 4.1 per cent in the year to March, slightly lower than in the year to December.
By contrast, Domain data shows that house prices in the capital city rose by 8.4 per cent in the year to March, but Melbourne saw a lower increase, while Sydney saw a higher increase.
But in the long term, the gap is very stark. In the 12 years to March, home prices in the capital city soared by 93.5 per cent, while wages rose by just 34.7 per cent.
Gareth Aird, head of the Australian economy at the Commonwealth Bank (CBA), said interest rates had been structurally declining for the 30 years prior to the past few years.
"As interest rates fall, so does the ability to borrow at a certain income level, which makes house prices continue to rise for a long time."
And more recently, despite interest rate hikes, house prices have continued to rise faster than wages, which he attributes to strong population growth, a relatively low supply of housing, and the support of buyers from their parents.
The latest data shows that down payments are increasing as buyers buy a home with the help of family members or the wealth they have created through housing (not just salary savings).
Aird also noted that with the increasing proportion of women in the workforce, the rise of dual-income households means that household incomes are growing faster than wages, which is another factor driving up housing prices.
"In several capital cities, the affordability of median-priced homes has reached its worst level in history, and it is becoming increasingly difficult to enter the housing market."
Buyers now need a larger down payment and have to repay the loan with a larger percentage of their income, but they may be buying a smaller property than they could have bought 30 years ago when their parents were working in a similar occupation.
PRD Real Estate首席经济学家Diaswati Mardiasmo也强调了新建住房的不足,以 及利率的结构性下降。
The gap between wage growth and house price growth is now so large that closing it will be a challenge.
"Even if wages continue to rise, even if house prices remain stable, wage increases have to be large enough and sustain a long time, and house prices have to remain stable for a long time to be useful."
"All else being equal, this gap will continue to widen as house prices continue to rise."
参考数据:CoreLogic,REA