Is housing supply meeting population growth?

Will-building-work-catch-up-with-population-growth_157_6008853_0_7074829_300There has been a fair bit of discussion about housing supply in Sydney in recent months. However, CoreLogic analysts have studied recent figures from the Australian Bureau of Statistics (ABS) and found that the level of building activity and the rate of population growth across the country could be meeting somewhere in the middle.

This is particularly good news for affordability. An ever-rising supply of new homes can begin to add a fresh selection of properties for buyers to choose from, and even swing the market back in their favour. CoreLogic Senior Research Analyst Cameron Kusher found that the population growth experienced nationwide has almost doubled the booming number of new dwelling approvals over the year to June 2014 – but the chasm appears to be closing. In fact, the number of people calling Australian capital cities home has dropped.

While the year to June 2014 saw a greater number of people – 288,994 – this was 6.2 per cent lower than the numbers recorded a year earlier. At the same time, ABS figures indicate that home building approvals surged over the same period. In fact, there were 25.6 per cent more dwellings approved over the period according to CoreLogic analysis – outstripping population growth.

Given the outstanding building approval results posted in the first two months of 2015, this is encouraging news. Closing the gap between supply and demand could make purchasing a home much more affordable, something that first home buyers will surely appreciate.

Sydney still the pack leader 

There was a large difference between capital cities and their regional counterparts, though. Population growth has continued to soar but the number of new homes needed to meet this demand has not been up to scratch. Sydney is a clear example of this. ABS figures show that Sydney’s population is surging towards the five million mark, the first city in Australia to do so. Between 2013-2014, the Harbour City gained an additional 84,200 people to reach 4.8 million.

This brings up a couple of issues. At face value, the housing shortfall seems to be staggering, but there has been a marked difference in the type of property. Unit approvals are gathering speed across the country, and no where is this more apparent than in the Sydney market. There have been far more multi-unit dwellings approved in the New South Wales capital over the past decade than detached houses.

Master Builders Australia CEO Wilhelm Harnisch seemed to confirm this in an April statement, pointing out that high rise apartments have been driving approval figures.

“Master Builders expects high rise apartments to continue to feature in new dwelling activity over the next 12 months in the Eastern Board capital cities with private sector housing steadying,” Mr Harnisch said.

This could have interesting implications. Mr Kusher pointed out that the city might actually need to build more houses, despite the strength of apartment building. These properties are typically much smaller and house fewer people than the traditional house, so are only suitable for a certain type of buyer – namely smaller households or young homebuyers.

This sets a clear challenge for policymakers, but the signs are looking positive. While the city is still bursting at the seams, population growth in the Sydney area has declined in a few areas between 2013 and 2014. If the housing market can keep up its glowing approval numbers, and if population rises were to ease back, there could be a few more affordable options on the market.

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