National housing supply issues have been selected by the property sector’s big players as the most critical issue facing the government.
The latest ANZ/Property Council survey showed that concern over the need for government to tackle national housing supply has surged to a record high of 48%, jumping seven percentage points from the previous quarter survey, and dwarfing all other issues, including tax reform and infrastructure delivery. The supply crisis was also top of the agenda for state governments, up six points to 49%.
ANZ and the Property Council said housing supply issues have been driven by a combination of long-term planning red tape and current economic constraints, as population growth, boosted by immigration, rises and rents soar, The Australian Financial Review reported.
Adelaide Timbrell, ANZ senior economist, said developers were caught in a bind, where surging rates and cost pressures had put a break on projects despite strong demand for housing.
“The forward work schedule is not really an issue for developers. Demand is not really an issue,” Timbrell told The Australian Financial Review. “What is an issue is whether that demand can be serviced in a way that is reasonable on a risk basis, and reasonable on a profit basis as well.”
Some residential housing projects would be put under pressure by large backlogs in the sector, while it was still difficult to source materials and labour for developments, she said.
“The demand is there, but it’s just really hard to either make the maths work or to make the execution work because of those shortages,” Timbrell said.
The quarterly survey of 744 property professionals showed overall confidence remained steady, rising one point to 114 points, with a score of 100 points considered neutral.
There was a slight uptick in interest rate expectations as the anticipated end of the rate hiking cycle looms, although the outlook on rates as a whole was still very pessimistic, the survey showed. Despite this week’s pause in cash rate hikes, ANZ is expecting the cash rate to peak at 4.6% in 2023, with any decline unlikely before late next year.
Mike Zorbas, Property Council chief executive, identified inadequate planning systems as another barrier to creating more supply, noting that 1.3 million more homes could have been delivered over the past 20 years, but for costly zoning, planning, and building red tape, according to a recent analysis from Tony Richards, former RBA economist.
Zorbas also cited a recent NSW Productivity Commission analysis that a 10% rise in supply generally results in a 25% cut in housing costs.
“State, territory, and local governments need to be accountable for increasing their run rate in providing housing across all market segments including social and affordable housing,” he told AFR. “We need national housing and planning improvement targets and we need the Australian government’s Housing Australia Future Fund to pass the Senate.”
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