Australian Property – Demand Outstrips Supply

Australian property is still in short supply and will probably remain so for the foreseeable future. According to the News Limited website on-going issues with larger developers getting financing means that Australia's rapidly growing population will struggle to be housed for the next few years.

Official estimates that the current Federal Government's fiscal stimulus will add 20,000 new homes to Australia's housing stock. Unfortunately Australia needs around 250,000 new homes just to meet current demand.  At a countrywide level this sounds bad (if you are looking for a home) or good (if you are an Australian property investor) - but of course at the individual level the situation is worse.

Most buyers don't' want a home in Australia - they don't even want a home in Melbourne - they want a home in Toorak they don't want a home in Western Australia - they want one in Port Hedland - and as soon as you get down to the individual town or suburb that is where the statistics get quite dramatic.

For example the NSW town of  Gunnedah is normally a quiet rural town of 10,000 people around 6 hours drive NW of Sydney. Well it was until one of Australia's largest underground coal seams was discovered. Gunnedah recorded NSW's third largest rental increase from $180 to $250 a week. But in fact there is nothing to rent in town - with one rental agency which had only 3 properties available recording 10/15 inquiries a day from potential renters who were prepared to pay up to $500/week for a property. So boom towns, particularly mining boom towns, will continue to push rental, and also property prices sky-high - its all about demand!

Affordable is generally the issue for Australia outside of the mining towns. The lack of funding options for large multi-unit developers is of particular concern for those groups involved with the estimated 105,000 Australians who are homeless. In addition Australia is slowly waking up to the fact the unconstrained urban sprawl may not be a long-term solution to city planning down under, and that higher density housing is disparately required in locations that people actually want to live in. However in 2009 approvals for multi-unit housing hit all time lows.

I suspect though you can't blame the bank's lending policies entirely. After that could always be fixed in the Federal Government was prepared to provide the right guarantees, as was proved last year with commercial property. In part the issue appears with the amateurish urban planning as practiced in most of Australia. Town planning rules appear arbitrary, without fixed guidelines. A project which should be approved will often be overturned because of political pressures coming to bare on local councilors. Or just because local councilor happen to own competing business interests.

Unless there is a radical shake up of Australia's town planning laws I seriously doubt that there will be much in the way of housing affordability or availability in the short to medium term.

Commercial High Rises, Park St Sydney Photo courtesy http://www.flickr.com/photos/chanc/