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Aussie dream turns to nightmare: How the real housing crisis is only just beginning

Business

It’s hard to use the word crisis and still get across the meaning of what’s likely to happen to housing in Australia.

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We have had a lot of crisis lately.

However, the housing crisis that exists now is likely to be very different to the one we have by the end of the year.

The industry has been ringing the alarm bells for months about what’s emerging as a serious disaster. But it’s kind of hard for them to get across that the crisis we have now – which has to do with affordability, homelessness and interest rates – is probably just the start.

Home construction approvals released this week for April were at an 11-year low. A total of just 11,594 dwellings were approved. The biggest drops were in higher density and renovations.

About 200,000 houses a year are needed and forecasts are well below that up until 2027.

Dwelling commencements this year in Queensland are expected to be 37,000. Next year the figure is forecast to drop to 31,000. Master Builders says about 40,000 is a healthy supply level for demand and it won’t reach that level until 2026. That’s a problem because by then it will be five years of below-par dwelling commencements.

There had been hopes that the market had found a floor, but as Westpac economist Matthew Hassan said: “The April update points to a significant broad-based downtrend that remains firmly intact.’’

It’s now a “sharp deterioration’’.

In Queensland, approvals for dwellings (including units) were down 22.8 per cent for April. By far the worst performance in the country. Approvals for housing in the state were down 6 per cent.

What that means is that affordability could become even worse.

“The stabilisation being seen in the wider housing market may eventually flow through to construction activity but it’s likely to be too little too late to prevent a very difficult year for the residential building sector near term,’’ Hassan said.

Meanwhile, demand is surging on the back of increased migration. Interest rates are likely to rise again and rents are astronomical. There are also early signs of a recovery of house prices.

In Canberra, the Housing Future Fund, a $10 billion plan to build 30,000 social and affordable housing properties, is bogged down in politics through opposition from the Coalition and the Greens.

The Palaszczuk Government said the solution is bringing more supply on line. It has a $3.9 billion investment program to deliver 13,000 homes.

This week it was delivering tiny homes to Gympie to help resolve the homelessness problem.

It’s easy to blame the immigration surge and yes, it is an issue, but those people are the workers that Australia desperately needs to not only fill the massive amount of job vacancies, but to also keep the economy ticking over.

At the moment there is a backlog of work that is keeping the construction sector going and feeding an industry that is now waiting for the music to stop.

That backlog was created by the Morrison government’s Homebuilder program, which has been a success that also created huge problems.

When that backlog is worked through we will probably see the real crisis develop.

Of course, the real problem is that the solutions take months if not years to work their way through the system.

The flow-on from the construction sector is immense. New houses mean new furniture, new white goods. It feeds the retail sector and that is also a major employer.

All of this will become political in the lead up to the state election next year so be prepared.

The blame game is about to kick off.

 

 

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