- April 23, 2014
- Posted by: Rogers Property Group
- Category: Latest News
A great report recently that highlighted the lack of supply of property coming onto the market vs. population growth in the capital cities. The report took the population growth of capital cities which in the last 12 months was at 313,387 (as per the ABS) then compared that to the number of new dwellings across these cities. The number of new dwellings in these cities across the same period of time was 114,825. While that seems like a big difference, you then must take into account that there are 2.6 persons to each household. With a quick calculation you can see yourself that there is a shortfall of about 6,000 dwellings already. There are other factors that then have to be taken into account that will further affect those numbers. That being, a lot of new builds are only replacing dwellings that are already there and not actually adding to the stock pool. The RBA estimates that around 15% of new housing is only replacing current housing. Secondly, the RBA assumes that approximately 8% of all dwellings are “second” dwellings. Being holiday homes etc. However, given the fact that the production of holidays dwellings and second homes would have dried up a little over the last few years and also taken into consideration that most holiday dwellings are outside of the capital cites, that factor will not affect figures greatly.
When we readjust our figures for the 15% replacement shortfall in overall shortfall in supply is quite high. The shortfall now comes in at around 23 000 over the past year.
Then we must look at the shortfall state by state because different states have different figures. On average each state needs a dwelling per 2.6 persons. However, for Brisbane and Perth they are only approving a dwelling for every new 3.26 and 3.45 residents, thus highlighting a greater shortfall. Sydney and Melbourne are slightly better at 2.72 and 2.48 which brings them pretty close to equilibrium.
Rule 101 when learning how to get started in property investment is housing shortage plus increasing population means increases in values over time.