New supply to overwhelm demand in 2021
Forecasts indicate that new supply will outpace new demand in 2021, until demand ultimately rebounds in 2023.
The National Housing Finance and Investment Corporation’s (NHFIC) first State of the Nation’s Housing Report, which reflects the unforeseen circumstances of 2020 and their impacts, expects new supply to outpace demand by 127,000 dwellings in 2021 and 68,000 dwellings in 2022.
Moreover, the report predicts that cumulative new supply will outpace new demand by around 93,000 by the end of the five-year projection period following a slight rebound in demand in 2023.
The NHSC, in its third and last report in early 2014, reported that the gap between the supply and demand for housing was projected to increase in the future, putting further pressure on housing prices. It expected a cumulative demand-supply gap of 557,000 dwellings in 2025 and 640,000 dwellings in 2013.
According to Real Estate Institute of Australia (REIA) president Adrian Kelly: “Since the abolition of NHSC, REIA has lobbied government for the establishment of a mechanism to provide reliable data on housing demand and supply in order to formulate appropriate policies and to monitor their effectiveness.
“With housing affordability recognised as a policy priority, it is very pleasing that NHFIC has filled that void with this much-needed comprehensive analysis of factors influencing demand and supply and thus affordability.”
Mr Kelly said that as a consequence, affordability, particularly rental affordability, is expected to improve over the next two years.
Beyond that, affordability for renters and prospective first home buyers could deteriorate if supply is not responsive to the rebound in demand, he said.
“These projections come off the back of REIA’s latest Housing Affordability Report, which showed a 10-year high for first home ownership and an overall improvement in housing affordability across Australia and point to a bright spot for those considering entering the market,” Mr Kelly concluded.
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