Australian Property Update – May 2022
Terry’s View – Terry Ryder is Australia’s Leading Independent Property Researcher
The most alarming factor in the Federal Election campaign is the absence of policies to deal with the housing market’s biggest issue, the shortage of rental properties. Indeed, none of the major parties have any policies that suggest they understand housing market problems and how to deal with them.
Both Labor and the Liberals have policies to make it easier for first home buyers to get a loan but they have not presented ideas to deal with the high cost of creating new homes. Neither show any sign of even being aware that Australia has the greatest ever shortage of rental properties, so there are no policies to increase the supply of homes for tenants.
The Greens’ real estate policies indicate that they see property investment as a criminal activity which should be stamped out.
Their ideas, if they ever became law, would make the rental shortage immeasurably worse.
It’s counter-intuitive for politicians, especially left-leaning ones, but the only way to address the rental shortage crisis is to introduce measures that encourage investors to buy homes and make them available for rental.
Strategy Needed To Solve Housing Woes
A Sydney-based think tank has called for whoever wins government at the Federal Election to roll out a “real long-term strategy” to make housing more plentiful and affordable.
Committee for Sydney has published a paper on the issue, with deputy chief executive Ehssan Veiszadeh calling for federal and state governments to make changes around housing policy.
Housing costs are the largest economic problem facing Australian cities, with property prices rising more than 20% nationally in the past 12 months.
“Without a major change to housing price dynamics, Australia is sleepwalking into a permanent class divide, where only those who inherit wealth are able to obtain the security of home ownership,” the paper says.
It blames policy settings at a national level, while state governments and development approval processes have also been implicated for a chronic undersupply of housing.
The paper notes that only 30% of houses in NSW are approved via a complying development pathway, a planning and approval process involving a fast-tracked assessment by council or an accredited certifier, compared to 70% in Queensland.
The CEOs of developer Mirvac and materials supplier Boral have called planning the top issue in housing, commenting the government’s main priority should be improving supply and planning approvals.
The National Housing Finance and Investment Corporation has warned lagging approvals were contributing to a surge in house prices and that the supply pipeline may fall behind demand as Australia’s international borders reopen.
Bunnings To Address Supply Shortages
Amid national shortages, Bunnings will double its processing plants that manufacture wooden frames and trusses used in home construction.
Over the next 18 months it will double the number of processing plants that manufacture frames and trusses, substantially growing its market share in a high-growth category that has struggled with shortages through the pandemic period.
A stronger and more national footprint of Bunnings manufacturing hubs will also bind it more closely to home builders who typically have a long shopping list of items they need to buy and could help lift sales across the group.
Currently hardware giant Bunnings operates three frame and truss sites in Australia – at Warnervale and Unanderra in NSW and Hallam in Victoria. Building industry insiders say Bunnings is searching for a site for a new frame and truss facility in Melbourne, another in Brisbane and potentially more in NSW.
Frames and trusses have been in short supply as rocketing timber prices and supply chain disruptions strangled the pipeline of the core building materials that form the internal structure of new homes.
Bunnings aims to set itself up as a major, growing supplier of frames and trusses to home builders, binding more closely to home constructors.
Rental Vacancies Filled In Record Time
The number of days a rental property sits on realestate.com.au before being leased has fallen to a historic low. The listing platform’s data arm, PropTrack, has
released its residential rental figures from the first quarter of 2022, revealing that properties are being advertised for fewer than three weeks before being rented, with the average falling from 24 days in January to 19 in March.
Out of all of the capital cities and state regions, Sydney (22 days) and Melbourne (23 days) are the only areas where listings spend longer than three weeks before being let.
Houses are still proving popular, with many people in search of greater space. National house rents were 4.3% higher over the quarter, while unit rental growth was 2.4%.
Rental yields, however, have tightened more for houses than multi-home complexes. The median rental yield for houses has fallen over the year from 4.1% to 3.6%, while unit yields experienced far less of a drop, now sitting at 4.1%, down from 4.3% a year ago.
The lowest yields of March 2022 were in Sydney (3.2%), Melbourne (3.5%) and Regional Victoria (4.1%). The highest yields were in Regional WA, regional SA and Darwin, all above 6%.