Research released today by the Property Council of Australia paints a bleak picture of future housing supply in Melbourne and Geelong, with an expected undersupply expected to worsen an existing housing affordability crisis.
The Urbis-led research shows that greater Melbourne faces a housing deficit of about 9000 new dwellings per year due to a combination of reduced active lot supply in growth areas and a dwindling pipeline of new apartments. Based on sales between 2018 and 2021 and comparing them to the supply of readily available land, there could be as little as three years of active lot supply in new Melbourne communities.
Forecast to become Australia’s biggest city by the end of the decade, Melbourne will need to house an additional 3.4 million people over the next 30 years, the report estimates. This is equivalent to 1.3 million new homes, averaging 43,000 additional homes per year. Geelong continues to grow rapidly as well, with new areas for development needed to keep pace with demand.
Property Council of Australia Victorian Executive Director Cath Evans said that reduced land supply would put further upward pressure on the cost of land lots in growth corridors, with the median lot price already rising from $212,000 in 2016 to $307,000 in 2021.
“To put this in context, this essentially means that in the last five years the median lot price has shot up from 2.6 years of average household income to 3.1 years. This only captures the cost of the land before you factor in the dramatic increases in construction costs as a result of supply chain and labour pressures,” said Ms Evans.
“With the borrowing capacity of homebuyers and investors declining and the costs of mortgages and rents increasing dramatically, boosting supply is now the best lever for government to create more affordable housing for Melburnians.
“The shortfall in the construction of new apartments has serious implications for rental affordability in our metropolitan corridors, disproportionately impacting those who can afford it least. This research highlights that there is approximately only two years of demand in supply from 24,000 units in major apartment projects. This is also expected to decline all the way through to 2025.
“Without coordinated and quick action across state and local government, the construction of new housing will continue to stall and lead to significant consequences for our liveability. Housing should be a key focus of the newly re-elected Government in 2023,” Ms Evans said.
The research by Urbis provides a number of recommendations and solutions for Victorian policy makers and planners to tackle the housing supply and affordability issues impacting the State, including:
- The creation of a Victorian Housing Supply and Affordability Council to work collaboratively with the new ³Ô¹ÏÍøÕ¾ Housing Supply and Affordability Council, bringing together Government and industry;
- An increased focus on ‘active’ supply and land that is available and suitable for development in the short term;
- The unwinding of surcharges on investors to unlock the stalled apartment pipeline; and
- Adoption and implementation of all 27 recommendations from the Commissioner for Better Regulation and Red Tape on improving Victoria’s planning and approvals process.
