Australia’s housing shortage

The preliminary results from the 2006 Census shows the Australian population grew 1.4 per cent during the 12 months ended December 31, 2006, as the country recorded 265,922 births, the second highest on record.

Oddly, I had always assumed our population was over 21m already. This is an upwards revision of population estimates, and it has lead a senior economist at Westpac to new expectations concerning the housing shortage. Or rather, ‘shortage’. It is more a shortfall, between houses, trends in building, and trends in population.

Needless to say, the trend is towards a housing shortage in the future. Of course this is a shortfall of 92,000 domiciles (the old estimate was 50,000). Housing starts (that is, new houses that have begun to be built) this year are about 150,000, compared with this underlying demand of about 172,000. Which really isn’t all that much, when you think about it.

Average incomes for Australia are in the AUD55,000 p.a. area (for as long as I’ve cared, the website of the Australian Bureau of Statistics has been a nightmare to navigate). That puts the maximum mortgage payment (affordable) at about AUD1650 per month, by my rough calculations.

Average mortgages in Australia are going for AUD318,000. AUD382,000, in NSW. Average mortgage payments in Australia are around AUD2,400 per month.

So…not a lot of slack there. Oddly enough the report by Matthew Hassan (the Westpac guy) and Housing Industry Association chief economist Harley Dale both pointed to the clear disconnect in affordability as keeping demand down (and why wouldn’t it? On average, mortgages should not be incomes x 6…), which in fact can help. But at the same time, vacancy rates are already around 1 or 2% all over. Every day the Sydney Morning Herald is on about this, one way or another. And that’s demand for new houses – it doesn’t mean those people disappear.

This has two interest sequelae (for me. I neither live in Australia, now, or own a house – and living in New York, I’m not going to any time soon): first, the intersections between this issue, the economy, the pressure coming for the Reserve Bank to raise, like many other central banks these days, interest rates (although John Howard is telling not only us but the Reserve Bank that rates don’t need to rise (and this is not the first time he’s tried to lean on the Reserve, by-the-by), and the as-yet unaddressed issue of housing affordability (I say ‘issue’, the papers say ‘crisis’) in Australia.

Secondly, there is the issue of land availability, and how much of it is being made available for estate, etc. housing. This is a state issue, rather than a federal issue (although the Howard government will use it, because it’s still an attack on Labor governments), but I expect it to become more and more prevalent.

This will also dovetail nicely with the fact that Sydney, for example, only has power and water for a couple of years more (and fully 20% of water usage is for power generation, as it is). Look for the pro-nuclear crowd to come along on the tail of this issue.

Meanwhile the UN’s Special Rapporteur on adequate housing meanwhile, has taken a slightly different approach to the housing ‘crisis’:

During a trip around Australia last year — which took in Aboriginal communities, shelters for domestic violence victims and public housing — Miloon Kothari found “reductions in public housing stock, soaring private rental rates, an acknowledged housing affordability crisis and no real reduction in the number of homeless”.

Poor people? Does he have any idea how far back in the queue they are? Urbanites and suburbanites first, thank you very much. This is an election year, after all.

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2 comments so far

  1. Jason H on

    Though I have never been to Australia this appears to be a relatively simple issue. You have less than 21m people living on a continent unto themselves, so there is plenty of land, just start allowing people to build on it. I am in Taipei right now and just to compare some statistics and show how ridiculous it is to have a housing shortage in Australia consider these quick stats

    Taiwan Pop: 23m
    Taiwan Land area:35000 km^2

    Australia Pop

  2. zooeygoethe on

    Our arable land is 6.55% of the total (49,8974 km^2, rather than the 7,617,930 km^2 total) – less by far than the EU (26%), the UK (24%) and the US (19%), but greater than Canada (4%) (http://www.ga.gov.au/education/facts/dimensions/compare.htm and some really cool overlaid maps, too!).

    Also more than Taiwan, obviously. But the habitable land quirk is what keeps our population density statistics (2.5 per sq km) Antarctically low.

    Typically the ‘problem’ occurs because the vast majority of immigrants go straight to Sydney, which cannot handle it, thence to Melbourne (i.e. the problem is mostly political, on the back of zero response to the actual logistical problem).

    This is at the same time, mind you, that regional areas are dying from the lack of people and workers.

    Even our Treasurer agrees (http://www.treasurer.gov.au/tsr/content/speeches/2006/014.asp):

    “In some countries where space is extremely limited there is a fear about increasing population.

    But Australia is not like that. We are a big country. We have lots of space. We are approximately the size of the USA without Alaska. But we have one fifteenth the population of the USA. We have room to grow.

    While a large part of Australia is desert there is still a large amount of habitable land capable of being populated and still further space for undisturbed natural environments and farmland.”

    Of course his motives also run a little Fox News:

    “Boosting our fertility rate is also necessary to balance our immigration program. At present half of Australia’s increase in population comes from net migration. At present the number of births outweighs the number of deaths but because our fertility rate is below replacement level over time this will change.

    You can see that if our fertility rate was to run below replacement levels and if the difference was made up by immigration, over the long term, the composition of our population would change.”

    I think this counts as racialist, rather than racist, but he’s still a dick for saying it. Already 1 in 4 Australians currently were born overseas (compared to, say, 1 in 8 in the US), so if he thinks he’s going to change the trend he’s high.

    Maybe he can’t look past what happened to our Indigenous people the first time the composition of Australia’s population changed? I doubt it, somehow.


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