Sydney prices set to soar as state fails to meet housing demand

According to Urban Taskforce, DPIE Housing Demand forecasts are based on the Greater Sydney Commission’s (GSC) 2016 numbers – which found that the number of new homes in Greater Sydney needed to be 725,000 (36,000 per year) between 2016-2036 to meet demand.

But according to the Draft NSW Housing Strategy Discussion Paper and Fact Book, released by Planning Minister Robert Stokes in May 2020, Greater Sydney has outstripped these predictions, with the city now in need of a further 1 million homes between 2020-2040 or 50,000 new homes a year.

The real problem, the Urban Taskforce said, is that DPIE is still clinging to the old data. 

The Urban Taskforce also pointed to the current Greater Sydney approval levels, which suggest the state would build 154,550 new homes over the next five years, which would equate to 31,000 new homes each year and fail to meet either target.

“The fact that prices are rising despite the drop-off in overseas migration reflects the fundamental economic reality: demand is greater than supply, so prices are rising,” the Urban Taskforce said.

They also pointed to a large lag between approvals and the completion of new homes.  

“The impact of the 2019 slowdown (which got worse in 2020 due to COVID-19) is yet to flow through to household completion numbers – but it will – and this will exacerbate the current rising prices in the Greater Sydney market,” the organisation stated. 

The Urban Taskforce said Minister Stokes has sent a clear signal to councils, which are refusing to adopt the GSC five-year housing targets – which are themselves based on the lower 2016 housing forecasts, not the more recent May 2020 analysis. 

“Ryde Council and Ku-ring-gai are the worst offenders. They have publicly rejected the GSC targets. If this flows through to other councils, housing supply will crash, pushing prices up and costing thousands of jobs in the sector,” they stated.

Archistar’s chief economist, Dr Andrew Wilson, opined that rising supply would help ease affordability issues in Sydney.

“The key to [affordability] is supply. If you have new supply, you have more product, and that is why the solution to housing affordability is to build more houses.

“In absolute terms, it is simple, but in big cities you have a lot of issues,” Dr Wilson concluded.