I don’t know about you, but I am losing count as to how many new homes the federal government is promising to build over the next five years.
At the time of writing, it is up to 1.2 million – or 240,000 per annum – between 2024 and 2029.
The Albanese government will give the state/territory governments $15,000 every time a new home will be built.
This will apparently help solve the rental crisis and supply more affordable housing.
Let’s unpack this a bit, shall we? And it is all about demand and supply.
The demand for new homes is likely to be elevated.
Why? Because there is higher annual level of population growth planned over the next five to ten years, and probably longer.
See charts 1 and 2 below.
Assuming this population growth eventuates – and despite growing dissention about the current and planned immigration intake – it is very likely, as there are strong economic and geopolitical reasons why, there will be a need to build some 230,000 new homes each year over the next five years.
When taking a decade long view, the new housing need is just under 210,000 new digs per annum.
The current new housing market is undersupplied, by my reckoning, by the tune of some 100,000 dwellings.
See table 1 and chart 3 below.
The federal government has visions of helping supply some 240,000 new homes each year, from fiscal 2024 to 2029.
Chart 4 shows that it will be very hard, if not impossible, to supply over 200,000 new homes, on a consistent basis, over the next five to ten years.
Some end comments
For mine we will not see an early election. Nor will there be a rent freeze or any rental controls.
Labour and The Greens will negotiate a higher annual housing donation to the states/territories over the next five years, so instead of $500 million per year – as currently planned – it might be $1billion in fiscal 2024, $750 million is 2025, etcetera, tapering back over time.
This will do little to help new housing supply, especially when it comes to affordable housing, homes that most people need or even available residences.
The proposed $15,000 transfer per new dwelling start from the federal coffers to the states/territories will also have some heavy caveats, like the need to use unionised labour for construction.
FIRB regulations are also likely to remain lax, allowing overseas buyers to purchase off-plan or newly constructed homes in Australia.
This – coupled with the overarching current mindset that higher density living is some form of magic panacea – will see much of this federal government largesse go towards high-rise apartment builds.
Some of these new builds will be in the build to rent space, but much will be built to sell.
On average – and when excluding the Covid-19 period – over the past five years, between a third and half of new high-rise apartments were sold to overseas interests, and many of these – roughly 40% – are locked up.
History is likely to repeat.
The government should offer nothing, except clear the roadblocks that delay new housing, yet instead the $10 billion Housing Australia Future Fund will distort the housing cycle, generate little in terms of affordable and available new homes and we will all have to pay (again) for helping overseas interests buy Australian dwellings.
In coming weeks, I plan to continue to this theme. I will be covering these topics.
- Net overseas migration. It is really too big?
- What type of new homes do we really want?
- Are developers really land banking?
- What really is going on with the rental market?
Lots of reallys!
If these topics interest you then keep an eye out for my Tuesday PM email or revisit this website.
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