New housing demand will pick up in the next 18 to 24 months as rising wages and falling prices combine to improve the affordability problem keeping buyers out of the market, says Stockland chief executive Tarun Gupta.
Mortgage payments equal to the “mid-40” per cent of disposable household income for Sydney – over the typical equilibrium level of 35 per cent – and at 33 to 35 per cent in Melbourne, in contrast to the “under 30″ per cent figure that represented equilibrium, would come down, Mr Gupta said on Monday.
“If you look out [to the] next … 12 to 24 months, and you get a 5 per cent wage rise, which is what’s taking place right now for the average Australian, that’s two years of 5 per cent wage rise and a price correction of 5-10 per cent,” he told The Australian Financial Review Property Summit.
“And if … the [Reserve Bank’s cash rate target] is, say, three and a quarter [per cent], which they were predicted to be recently, then you’re back in equilibrium in 2024.”
The problems of Australia’s housing supply shortage, which is masked by market weakness, would once again then become apparent, Mr Gupta said.
“We have an underlying demand-supply imbalance because there’s more demand and supply,” he said.
“We haven’t had the immigrants come in, the immigration’s just starting to pick up and when they arrive, there’ll be even a more acute demand-supply imbalance.”
Easing of bottlenecks in planning and land delivery are key problems underpinning Australia’s housing shortage, which the National Housing and Finance Investment Corporation earlier this year said would leave the country with a 163,400 shortfall of dwellings by 2032.
“Housing supply is set to decline in real terms by about a third just as population growth resumes,” said Ken Morrison, chief executive of the Property Council of Australia.
Domain CEO Jason Pellegrino said the severe lack of available land for development and slow land releases had to be addressed.
“In NSW, the data shows we’re severely lacking land release of lots between 300 square metres and 600 square metres, and 600 and 800 square metres in Victoria,” Mr Pellegrino said.
“We need more land supply and faster land releases. We need to start using data and technology to support land release, local councils and development applications and approvals. Understanding this data and having the government invest in the technology to do that is critical.”
Boosting rental supply was also critical as vacancies tighten around the country, said Leanne Pilkington, CEO of real estate agency Laing and Simmons.
“We have a crisis across the country when it comes to housing,” Ms Pilkington said.
“We have vacancy rates of less than 1 per cent, which is horrifying. People are paying over the advertised rents because they just need to get a roof over their family’s head, so it’s really quite frightening out there.”
But the tax regimes adopted by some state governments such as the aggregation of land tax rules in Queensland were a hindrance as they were dampening investor demand, Mr Morrison said.
“I think what the Queensland government is doing is dumb. Do they need more or less housing? They need more housing, as research by Property Council showed that there’s about 220,000 southern staters ready to move up to Queensland over the next few years,” he said.
“So where is that housing going to go? They don’t have forward plans there. So they should be doing everything they can to facilitate that forward supply of housing to accommodate a really significantly growing population, not impede it.”
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/housing-market-will-return-to-balance-in-2024-stockland-ceo-20220919-p5bj5q