With new housing supply constrained, immigration will add to demand. But a bigger influence on housing demand is homegrown – and it’s not going away.
Rents are still going up in Australia. This week’s inflation data showed that rents increased 6.3 per cent over the year to May, the highest level in more than a decade.
“As rents go up, people decide not to move out of home or don’t have that home office; they might get a flatmate,” Lowe said in May. “The increase in supply can’t happen immediately, but the higher prices do lead people to economise on housing, don’t they? Kids don’t move out of home because the rent is too expensive or they decide to get a flatmate or a housemate. We need more people on average to live in each dwelling, and prices do that.
The fight for supply isn’t just raging in development circles. It’s being fought out at city council and state level, as local authorities And, with the advent of the COVID-19 pandemic in 2020, the borders closed, the industry association revised its original forecast for new housing commencements in Australia of 200,000 new homes that year. However, it cut the figure not to zero, but to 114,000 – and ABS figures show the eventual total was 113,229.The reason for that is what economists call changing household formation – simply put, changes to the number of people living in the home.
“It’s the same building with the same height,” the Kokoda Property boss says of the project due for completion in the first quarter of next year. “We’ve adjusted the building during construction to meet the needs of owner-occupiers and residents.” So how reversible is this? RBA governor Lowe expects that it is reversible, that the functioning market will push– whether that’s kids moving back home or share houses getting bigger – as a consequence of rising rents. That will happen, to an extent. But a large part of the reduction in Australia’s average household size appears permanent.
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