An additional 30,000 homes were built in Sydney in the last financial year, the most building activity since the city’s 2000 Olympic Games, new data shows. But experts say even this level of home building isn’t enough to improve affordability.
In 2015-2016, 30,191 new houses and apartments were completed, up 10 per cent year-on-year, figures from the Metropolitan Housing Monitor released on Tuesday found. This compared to 30,520 new homes built in 1999-2000, when builders were rushing into the market before the introduction of GST in July 2000.
About 40 per cent of the completed houses and apartments were concentrated in six local government areas, including the City of Sydney, Blacktown, Camden, Parramatta, Liverpool and The Hills.
“More houses being built means more opportunity for Sydneysiders to buy homes across our city,” Planning Minister Rob Stokes said.
“Unprecedented spending on new public transport and roads is helping to address a housing undersupply backlog of up to 100,000 homes.”
The supply surge was welcomed by Urban Development Institute of Australia chief executive Stephen Albin, who said it was one of the most positive and efficient steps to address affordability.
“We have issues with affordability and the best way to tackle that with supply,” Mr Albin said.
But he warned the figures are only “just meeting supply … we still need to eat into the 100,000 [undersupply]”.
With building approvals at 16-year highs, the big question is whether they’ve already peaked, which would mean a supply-side approach to affordability wouldn’t be enough. Forecasts from research house BIS Shrapnel seem to suggest they have.
After reaching a record total dwelling commencements in 2015-2016 of 67,450, the home building market will decline, BIS Shrapnel managing director Robert Mellor said. This would translate into a subsequent fall in home building that would leave Sydney 37,200 homes short by June 2017.
“Even by the second half of this financial year we’ll see some easing on the back of off the plan apartments,” Mr Mellor said.
“The quickest way to affordability to improve is for a substantial price correction, which is more than 10 per cent, and I don’t think that’s going to happen,” he said.
“On our forecast, in the next five years we will see little price growth. Affordability will improve but it’s a slow process.”
Housing Industry Association senior economist Shane Garrett also expects home building to “ease back a bit over the next few years”.
Instead, a focus on the tax treatment of property, which he estimated accounted for 40 per cent of the cost of a new house and land package, should be on the government’s agenda.
Despite this, any increase in supply was the “single best solution that exists” to tackle dwelling prices that have surged 65 per cent in the past four years, he said.
“The undersupply has come from building being so low for such a lengthy period of time from 2002 to 2012,” he said.
But while a surge in supply is “better than nothing” it’s unlikely to dramatically change the housing market dynamics in Sydney, Domain Group chief economist Andrew Wilson said.
“The Sydney market has been characterised by a chronic undersupply since the boom of the early 2000s and I think that Sydney will remain behind the eight-ball for the forseeable future in terms of being undersupplied,” he said.
“The latest data shows absolutely no sign these completions are having any impact on prices – in fact, prices are accelerating again in the Sydney basin.”
While this should be a cause for concern, he said it was time to consider that “perhaps we’ll never have enough supply in Sydney” and there should be a shift in focus towards improving renting conditions instead.
Credit: www.domain.com.au/
