Australia’s housing market has witnessed an increase in dwelling values and stock, with 52,900 new homes added to the residential market in the June quarter of 2024, according to the Australian Bureau of Statistics. This increase brings the total number of residential dwellings to 11.211 million, further emphasising the urgent need to address housing affordability and supply issues. The government’s recent commitment to building 1.2 million new homes over the next five years is under scrutiny, with experts questioning whether these targets will alleviate ongoing housing pressures.
The addition of 52,900 homes in the June 2024 quarter marks a step towards the federal government’s ambitious target of building 1.2 million homes over the next five years. However, this pace needs to accelerate significantly if the government is to meet its goal. At this rate, around 211,600 homes would be added annually, which is shy of the 240,000 per year required to hit the target. While progress is being made, the challenge lies in maintaining and increasing this momentum amidst rising construction costs, labour shortages, and supply chain disruptions.
The latest ABS figures reveal that the total value of residential dwellings rose by $225.9 billion, reaching $10.911.8 billion in the June quarter of 2024. This jump in value is set against the backdrop of rising housing costs, with New South Wales leading the pack with an average dwelling price of $1,222,000, followed by the ACT ($953,900) and Victoria ($900,300). The Northern Territory recorded the lowest average dwelling price at $538,000.
However, despite the overall increase in national dwelling values, Victoria is the only state to buck the trend, failing to match the housing value growth seen elsewhere. Tim Lawless, Research Director at CoreLogic, observes that Melbourne’s property market has been lagging behind other capitals, such as Adelaide and Perth, which have seen substantial growth in recent years.
“The past five years have seen national dwelling values rise by 47.9%, but Melbourne’s growth stands at just 19.8%, far below the national average,” Lawless explains. He attributes this to a combination of factors, including Melbourne’s rapid densification and the high proportion of multi-unit dwellings in the city. “Melbourne has densified more substantially and rapidly than the mid-sized capitals, with around a third of its housing stock now made up of multi-unit dwellings, compared to 16% in cities like Adelaide and Perth.”
The federal government’s recent housing pledge is designed to tackle these affordability and supply issues. In a bid to combat rising prices and ease the housing shortage, the Albanese government has committed to constructing 1.2 million new homes over the next five years. However, many housing analysts remain sceptical about whether this goal is achievable, given the complexity of the housing market and ongoing issues with land availability, labour shortages, and high construction costs.
Lawless highlights the key challenges ahead: “The government’s ambitious target is a positive step, but the market is dealing with severe labour shortages and rising building costs, which have been exacerbated by supply chain issues since the pandemic. These factors will make it difficult to deliver the promised number of homes.”
The promise of new homes is also set against rising interstate migration, which has fuelled demand in cities like Brisbane, Perth, and Adelaide. Since the pandemic, Melbourne has experienced a net loss in population as residents relocated to less expensive and less restrictive cities, further contributing to the city’s slower housing market recovery. According to the latest data, Victoria’s internal migration figures remain in negative territory, whereas states like Queensland, South Australia, and Western Australia have seen positive net migration, driving up property values and demand for new homes.
As Lawless points out, “The past five years have shown extreme diversity in housing conditions across the country. Perth has seen a 76.4% rise in property values, while Brisbane and Adelaide have posted gains of 71.5% and 70.8%, respectively. In contrast, Melbourne’s values have increased by only 19.8%, reflecting the city’s unique demographic and housing challenges.”
The disparity in dwelling value growth can also be traced back to the composition of housing in each city. Melbourne’s high proportion of multi-unit dwellings, which typically have lower values than standalone houses, has contributed to its slower growth. In contrast, cities like Perth and Adelaide, which have a lower proportion of multi-unit dwellings, have seen more robust growth in property values.
The government’s housing plan will need to consider these factors if it is to meet its target of 1.2 million new homes by 2029. While increasing housing supply is critical to easing affordability pressures, experts like Lawless argue that simply building more homes is not enough. “The composition of new housing, whether it’s standalone homes or multi-unit developments, will play a crucial role in determining the success of the government’s plan,” he says.
As housing affordability becomes an increasingly pressing issue, especially in capital cities like Sydney and Melbourne, the government’s ability to deliver on its housing promises will be closely watched. The rise in housing values across Australia underscores the need for a balanced approach to new housing developments, ensuring that both affordability and supply targets are met.
In the meantime, property markets in mid-sized capitals such as Adelaide and Perth continue to thrive, outpacing Melbourne’s growth and reshaping the hierarchy of Australia’s housing market. With Sydney’s median dwelling value still at the top, standing at $1.18 million, the gap between Sydney and other capitals like Brisbane has narrowed significantly, reflecting the changing dynamics in Australia’s housing market.
As the housing sector evolves, the government’s home-building promises will be a key factor in shaping the future of affordability, particularly in cities facing the greatest pressure. Whether these ambitious targets will translate into real solutions for Australian families remains to be seen.
Sources: ABS, CoreLogic
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