Future Housing Australia's - Hia
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Housing Australia’s
Future
NATIONAL,
NEW HOME POPULATION
STATE AND
BUILDING GROWTH
TERRITORY
REQUIREMENTS SCENARIOS
ANALYSIS
UNDERLYING
DEMOGRAPHIC
DEMAND
Demographic Analysis of Australia’s Housing Requirements
2018
CONTENTS
Executive Summary ........................................................................................................... 2
Introduction ......................................................................................................................... 4
Factor #1: Population ................................................................................................. 5
Census 2016 Update........................................................................................ 5
Ageing population and Net Overseas Migration (NOM) ................................... 6
Population Growth Scenarios ........................................................................... 7
Factor #2: Household Formation ................................................................................ 8
Housing Density ............................................................................................... 8
Vacant Dwellings .............................................................................................. 9
Non-private dwellings ..................................................................................... 10
Demolition and Conversion ............................................................................ 10
Factor #3: Household Disposable Income ............................................................... 11
Scenarios of Future Housing Demand ..................................................................... 13
Housing Affordability: Census Update ...................................................................... 14
Conclusion ........................................................................................................................ 18
Housing Australia’s Future: A Demographic Analysis of Australia’s Housing Requirements 2018
Copyright
© Copyright 2018. HIA Limited is the sole and exclusive owner of all rights, title and interest (including intellectual property rights)
subsisting in this publication, including any data, analytics, statistics and other information contained in this publication.
This publication is strictly private, confidential and personal to its recipients.
This publication may not be copied or transmitted in whole or in part in any form, including by photocopying, facsimile, scanning or by
manual or electronic means. Multiple copies can be supplied by arrangement/for an additional charge. Unauthorised copying is a
breach of HIA’s copyright and may make you liable to pay damages.
Permission is not given for any commercial use or sale of this material.
Disclaimer
The data and information (including commentary) provided in this publication is of a general nature only.
While HIA uses commercially reasonable efforts to ensure that:
(a) any data and information is current at the time of publishing; and
(b) all opinions, conclusions or recommendations are reasonably held or made as at the time of their compilation,
HIA does not warrant the accuracy, reliability or completeness of the publication in whole or in part.
It is your responsibility to assess and verify the accuracy, completeness and reliability of the information in this publication, and to
seek professional advice in relation to that information.
To the full extent permitted by law HIA excludes all loss or damage howsoever arising (including through negligence) in connection
with the publication.
www.hia.com.au
P1 HIA HOUSING AUSTRALIA’S FUTURE 2018
Executive Summary
Executive Summary
The past 15 years for Australia’s housing market have been dominated by a persistent imbalance between
the rapid growth in the population and the slow rate at which new housing stock has come online. This
imbalance in the supply of and demand for housing has been the underlying cause of rapid acceleration in
prices and ultimately Australia’s housing affordability crisis.
In more recent years, state governments have responded to the crisis by facilitating growth in new housing
supply through making some progress in increasing the availability of land for housing and by facilitating the
construction of higher density dwellings in metropolitan areas.
These measures, combined with auspicious interest rate settings, culminated in a record build of 233,544
new dwelling commencements in 2016. This level of building exceeds the previous record set in 1994 by 25
per cent and is also 37 per cent higher than the average annual build of this century.
Critically, for the first time since 2003, the number of homes built in Australia has come close to fulfilling the
needs of Australia’s growing population.
Against these significant shifts in Australia’s housing environment – which are illuminated by 2016 Census
data – HIA has updated its flagship analysis of Australia’s housing demand and supply, Housing Australia’s
Future. Specifically, the report considers future economic and demographic scenarios and the corresponding
level of housing demand the industry will need to satisfy.
From this analysis we conclude that if the population continues to grow at the current rate and economic
growth remains modest at around current rates, Australia will need to increase the number of homes it
builds each year from 2018 to 2050 by 20 per cent to avoid compounding the existing affordability
challenges that the community already faces.
Achieving this goal is a challenge in its own right. The challenge would be exacerbated if Australia’s
household income growth returned to a rate above its long-term average as this outcome would generate
further housing demand. If this does occur, then Australia will need to build in excess of 250,000 homes
each year on average simply to ensure that the current affordability challenge is not amplified.
By way of comparison, Australia built just 175,000 dwellings per year on average over the 17 years since
2000.
A summary of the new home construction levels required out to 2050 is provided below. Details regarding the
research and analysis underpinning these projections are provided in the body of the report.
Estimate of Future Housing Demand from 2018 to 2050
Population Growth Low Medium High
Low 131,371 167,041 215,123
Household Income Growth Medium 148,737 184,407 232,489
High 166,103 201,773 249,855
Source: HIA Economics
This quantum shift upwards in the number of new homes required has not, and cannot, be met solely with the
construction of the traditional detached house.
Census 2016 results demonstrate that apartments and semi-detached dwellings are housing a larger
proportion of Australian households. This trend has partly been driven by households acting on a preference
to enjoy inner-city living, which is most accessible through apartment dwellings and the affordability of
apartment living. A third of Australian households are now living in an apartment, compared with 5 per cent
25 years ago.
P2 HIA HOUSING AUSTRALIA’S FUTURE 2018
Addressing the affordability crisis is not a task that can be completed in a few years, or by amending single
policies such as negative gearing and capital gains tax, placing punitive charges on foreign investors or
focusing on short term development strategies.
A meaningful response to the affordability crisis must see the needs of the housing industry be a key focus of
government policy – at each of the three levels of government. Improvements in the delivery of residential
land and in approvals processes for new homes need to be accelerated.
Housing needs to be a key focus of an economic reform agenda in Australia, to ensure that the
excessive and inefficient cost of new housing supply is reduced. This can only be achieved with the
oversight and leadership of the Federal government working collaboratively with state and local
governments and in collaboration with the housing industry.
P3 HIA HOUSING AUSTRALIA’S FUTURE 2018Introduction
Housing Australia’s Future provides estimates of the underlying requirements for new homebuilding in the
context of Australia’s growing and ageing population out to 2050.
The report also highlights the importance of ensuring that the cost of supplying this new housing is neither
excessive nor inefficient in terms of taxation and regulation; and that land supply and planning systems do
not constrain new housing activity.
This 2017/18 update to the Housing Australia’s Future report takes into consideration the results of Census
2016 and assesses a range of scenarios for home building requirements over the years out to 2050.
The unpredictability of future housing demand means that government and industry need to be prepared for a
range of potential outcomes and be nimble in their responses to changes in the drivers of demand. Some of
the drivers of housing demand, such as overseas migration, can shift quickly. Others, like the ageing of the
population happen in a more predictable manner over relatively long timeframes.
Economic and financial conditions also have an impact on the demand for new housing at particular points in
time and in particular locations. An increase in the growth of household incomes and a rise in mortgage rates
are two potential examples over the next few years. The large short term variations in new home building
from one year to the next are driven by these conditions. The sentiment of both owner-occupiers and
investors is also a key short term driver of new home building activity.
Housing Australia’s Future considers such factors, but also looks beyond these considerations to assess the
longer term drivers of demand. The scenarios provided in this report for future housing demand are estimates
rather than forecasts.
Housing Australia’s Future considers three major variables in determining the demand for housing:
1. the population growth rate;
2. the number of people per dwelling (household formation), and,
3. the change in household income.
This report considers a range of possible outcomes amongst each of these variables to produce a broad
range of possible scenarios for the number of dwellings that will need to be built to accommodate Australia’s
future population to the year 2050.
P4 HIA HOUSING AUSTRALIA’S FUTURE 2018Factor #1: Population
The population growth rate and compositional change in the population is a crucial driver of economic activity
and determinant for the type and quantity of housing that needs to be built.
The growth in Australia’s population over coming decades will be driven by three factors.
- The rate of net overseas migration;
- Changes in life expectancy;
- Changes in fertility rates
This analysis brings the three major variables together along with other assumptions and provides a number
of scenarios for Australia’s population out to 2050.
Census 2016 Update
In 2017 the Australian Bureau of Statistics (ABS) released the results of the prior year’s national census of
population. The information collected via Census 2016 resulted in a material upward revision to the estimate
of Australia’s population.
The update revealed that there were around 87,000 more people living in Australia than had been estimated
prior to the census. Estimates of the population in each state were also revised following the census. The
revisions were particularly significant in Victoria and Western Australia, with the estimate for Victoria revised
up by over 110,000 and the estimate for Western Australia revised down by around 58,000 people.
At the time of Census 2016 Australia’s resident population sat at around 24.21 million people and over the
year to June 2017 this grew by 1.6 per cent to 24.60 million. This equates to an increase of around 390,000
people. In comparison to other developed economies, an annual growth rate of 1.6 per cent is exceptionally
strong.
The majority of the growth over the year is attributable to a very strong contribution from Net Overseas
Migration (NOM) which reflects the situation where Australia had far more inbound migrants arriving on our
shores than there were residents migrating to other countries. Over the year to June 2017 NOM contributed
245,408 people to the population, which is 27 per cent larger than the contribution in the previous financial
year.
The strong contribution from NOM made up for a weakening contribution from natural population growth
(births minus deaths). This represents the end of a mini-boom in the natural rate of growth which was evident
following the Federal Government’s ‘Baby-Bonus’ policy introduced in May 2004. The birth rate increased
from 1.74 babies per woman in 2001 to 2.02 in 2008 and has since declined back to 1.8. Natural population
growth contributed 142,716 people to the population during the year to June 2017, which was down by 7.5
per cent compared with the previous year.
The rates of growth in each state align with each state’s economic performance. Rates of population growth
closely align with the relative strength of employment markets across Australia’s states and territories.
Annual Population Growth - Sep Qtr 2013 vs Sep Qtr 2017
Source: ABS
3.5%
3.0% 2.9%
2.7%
2.5% 2.3%
2.2%
2.0% 1.9% 1.9%
1.7% 1.8%
1.6% 1.6% 1.6%
1.5% 1.4%
1.0% 0.9% 0.8%
0.6% 0.6%
0.5%
0.1% 0.1%
0.0%
NSW VIC QLD SA WA TAS NT ACT Australia
Jun-13 Jun-17
P5 HIA HOUSING AUSTRALIA’S FUTURE 2018Ageing population and Net Overseas Migration (NOM)
The ageing of a nation’s population is a global phenomenon from which Australia is not immune. The 2015
Intergenerational Report (IGR) highlighted the acceleration in the ageing of Australia’s population which will
occur in the years ahead. This report projected that the population of Australia aged over 65 years old will
increase from 3.6 million people in 2014/15 to 8.9 million people in 2054/55.
The proportion of Australia’s population that is over 65 years old will also increase considerably in the
decades ahead. Based on the IGR figures the share of over 65’s in the total population will increase from
15.0 per cent to 22.6 per cent mid-century.
Australia also experienced a mini-population boom sometime after the Howard Governments ‘Baby-Bonus’
policy was announced in May 2004. The birth rate increased from 1.74 babies per woman in 2001 to 2.02 in
2008 and has since declined back to 1.8. Natural population growth contributed 142,716 people to the
population during the year to June 2017, which was down by 7.5 per cent compared with the previous year.
Now that the mini natural population boom is ending, the focus turns to the ageing population and the crucial
role that net overseas migration (NOM) needs to play in the years and decades ahead. Australia’s future
prosperity is linked to the economy’s ability to attract skilled migrants of working age.
With fewer people of traditional working age compared with the very young and the elderly, Australia will be
increasingly reliant on NOM to maintain growing living standards.
Policies that restrict NOM run the risk of harming Australia’s future economic prosperity and the standard of
living of future generations of Australians.
Australia's Population Growth by Component - Moving Annual Total (MAT)
Source: ABS 3101.0
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Sep-87
Sep-88
Sep-89
Sep-95
Sep-96
Sep-97
Sep-98
Sep-04
Sep-05
Sep-06
Sep-07
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-90
Sep-91
Sep-92
Sep-93
Sep-94
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
MAT = Moving Annual Total
Increase in population (MAT) Natural Increase MAT Net Overseas Migration MAT
Government policy is not the only factor that affects Net Overseas Migration. A relatively strong economy can
be another important component. These two influences combined to generate a very strong upcycle in NOM
over the second half of last decade, as illustrated by the first circled area in the chart Australia’s Population
Growth by Component.
The strength of the Australian economy after the Global Financial Crisis (GFC) ensured a large supply of
skilled workers returning, or migrating, back to Australia. This can be seen in the second circled area in the
chart above. As Australia’s relative economic strength declines, due to other developed economies
recovering from the GFC, Australia’s relative attractiveness to skilled migrants will decline. That would lead to
a reversal in the third NOM upswing circled, an upswing driven by Australia’s relatively strong economic
performance by developed country standards over recent years.
The structurally higher levels of NOM evident in the chart above are reflected in both the upswings and the
downswings in migration. The maintenance of these structurally higher immigration cycles is essential to
Australia’s future prosperity.
It is also the case that housing needs and preferences change as the family structures and financial
situations of migrants evolve.
P6 HIA HOUSING AUSTRALIA’S FUTURE 2018History has shown that there can be relatively substantial and quite rapid movements in the levels and
composition of overseas migration. Over the last decade these changes have primarily been the result of the
economic consequences of the GFC and changes in migration policy by the Federal Government.
For this reason it is important to consider a variety of population growth scenarios which take account of the
impact of future Government policies.
Population Growth Scenarios
Population projections are notoriously unreliable. The source of the greatest uncertainty about the scenarios
of future housing demand is the levels of overseas migration. Net Overseas Migration (NOM) is a volatile
component of population growth and generally reflects the relative strength of the Australian economy
compared with the international environment, together with Federal government policy.
The uncertainty regarding Australia’s future economic prosperity and government policies make it necessary
to consider a broad range of scenarios for Australia’s future population growth.
The three population series in the table below are the Australian Bureau of Statistics population projections
released in 2016 which estimate Australia’s population will increase to around 37 million by 2050. From these
projections we can derive a low, medium and high rate of population growth in the years ahead. These
scenarios involve a number of other assumptions around mortality, the natural rate of population growth and
migration.
The high, medium and low ABS population growth scenarios reflect assumptions of high, medium or low
NOM, fertility and life expectancy.
For example, the ‘Medium Growth’ population scenario assumes a population growth rate of 1.3 per cent per
annum, which is reasonable to expect over coming years as the natural rate of population growth is slowing
and Australia’s population will continue to age.
Population Growth Scenarios
Implied annual population
Population in 2017 Population in 2050
growth rate
High 24,598,933 41,402,943 1.6%
Medium 24,598,933 37,317,252 1.3%
Low 24,598,933 34,286,275 1.0%
Source: ABS
Inherent in the ‘High Growth’ scenario is a relatively high rate of net overseas migration and natural
population increase which will maintain population growth at the current rate of 1.6%.
The ‘Slow Growth’ scenario could occur as a consequence of Australia not offering skilled migrants the
employment opportunities they are seeking.
P7 HIA HOUSING AUSTRALIA’S FUTURE 2018Factor #2: Household Formation
Housing Density
The number of people per household is one of the most crucial variables in determining the underlying
requirement for housing in the future.
The number of people per household declined for a number of decades, but this trend reversed from 2005.
Census 2016 reinforced a renewed upward trend when reporting a further rise in housing density.
The Australian Bureau of Statistics derived from the information collected in Census 2011 an estimate of
housing density of 2.65, based on all structures deemed to be ‘residential’, which include non-permanent
structures. In Census 2016, which used a different methodology than that employed in 2011, the estimated
density increased to 2.69. The change in methodology makes comparison over this time, using this estimate
of density, problematic.
As a consequence of the Census only being taken every five years and the change in methodology, HIA has
its own model for estimating the number of people per dwelling. This includes an estimate of resident
population and the estimated number of households. Population estimates are based on the more regular
ABS quarterly publication related to Australian demographics 1.
Growth in the number of people and households
Source: HIA Economics, ABS
3.0%
2.5%
Annual growth
2.0%
1.5%
1.0%
0.5%
Jun-87
Jun-89
Jun-91
Jun-93
Jun-95
Jun-97
Jun-99
Jun-01
Jun-03
Jun-05
Jun-07
Jun-09
Jun-11
Jun-13
Jun-15
Population growth Household growth Jun-17
HIA’s household density estimate is based on the ABS quarterly demographic history. We project growth in
the estimated resident population and the estimated number of households, while taking account of the
quarterly dwelling completions cycle and the extent to which these completions add to the overall number of
households.
From this model we derive an estimated number of people per household of 2.57 in June 2017, which is
considerably lower than the latest Census estimate. The ABS in its Household Projections publication 2
estimates that the number of people per household will gradually decline over time, but they provide a
projection range of 2.48 to 2.64. HIA’s estimate in this analysis falls comfortably within this range.
HIA’s estimate of household size over time can be seen in the line in the chart of Household Size Estimates.
The three dot points in the chart Household Size Estimates represent the three ABS Census estimates for
household size. The first two numbers are relatively close to HIA’s estimates. The figure of 2.69 from Census
2016 is considerably higher than the HIA estimate.
1
ABS 3101 Australian Demographic Statistics
2
ABS 3236 Household and Family Projections, 2011 to 2036
P8 HIA HOUSING AUSTRALIA’S FUTURE 2018The large discrepancy in 2016 highlights the deterioration in housing affordability which has occurred in
recent years. The 2011 Census pre-dated the latest residential property price boom on the eastern seaboard
which commenced in late 2012. Since that time property prices have risen substantially, especially in Sydney
and Melbourne (where 40 per cent of Australia’s population resides).
HIA’s estimates highlight the trend in household size you would expect to observe based on Australia’s
growing population and changing demographics. The ABS estimate derived from 2016 Census results shows
a higher household density which suggests housing affordability constraints have forced more people to live
under the same roof in recent years.
Census 2016 found that the number of people living in each dwelling has increased in Sydney and Melbourne
to 2.7 people. Furthermore, the number of households with six or more people has increased by 20 per cent
since 2011
Household Size Estimates
Source: HIA Economics, ABS Census
2.90
2.85
2.80
2.75
Annual growth
2.70 2.69
2.65
2.61
2.60 2.59
2.55
2.50
Jun-89
Jun-91
Jun-97
Jun-99
Jun-05
Jun-07
Jun-13
Jun-15
Jun-87
Jun-93
Jun-95
Jun-01
Jun-03
Jun-09
Jun-11
Jun-17
HIA Household Size Estimate Census estimates
HIA also models demographic demand and this model can highlight the importance of the population density
number to the underlying requirement for new housing.
The sensitivity of this population density variable reinforces the importance of a policy focus on housing to
ensure that the population is adequately and affordably housed in coming decades.
Vacant Dwellings
Census 2016 reports that 11.2 per cent of dwellings in Australia (over 1 million) are unoccupied. That is the
equivalent of every dwelling that was built in Australia over the past six years remaining unoccupied. This
Vacant Dwellings data is an erroneous measure and is not a valid data set for developing policy that affects
the operation of housing markets.
This is of particular interest as both the Federal and some state governments have recently announced
punitive measures on properties that are left vacant. These measures are intended to assist in easing
housing affordability, but these measures are based on a simplistic and misleading link.
Before policy makers jump to the conclusion that more than one in ten homes in Australia are vacant, it is
worth noting that this data was not collected through the Census itself, but directly from the ABS employees
who distribute the Census forms.
This result can more accurately be described as a measure of the number of households that did not submit
a Census form.
A household that does not submit a Census form is not a valid method of determining the number of homes
that are not being made available to the market for occupation.
The Census data contradicts the ABS employee’s observations which shows us more clearly that there is a
constraint on housing.
P9 HIA HOUSING AUSTRALIA’S FUTURE 2018Dwellings can be vacant for a range of reasons and are an essential part of the operation of housing markets.
These include:
- Former occupants relocating and new residents not yet moved in;
- The dwelling being for sale with the former occupants already moved or deceased;
- Holiday accommodation;
- Residents away on holidays or for work commitments;
- The dwelling awaiting demolition or conversion; and
- The dwelling deliberately left vacant as an investment decision.
- This final reason has attracted political attention where the owner may be a foreign investor. There is
no public data available to support this contention
The initiatives aimed at reducing the number of vacant dwellings are not going to ease affordability
challenges. Such policies are either going to be superfluous or have unintended negative consequences and
are evidence of the type of policies that can be developed when industry is not engaged in the policy
development process.
Unoccupied Private Dwellings as a % of the Total Housing Stock
Source: ABS Census 2016
15%
14% 14%
14% 13%
13% 13%
12%
% change of Housing Stock
12%
11%
11% 11%
10%
10%
9%
8%
8%
7%
6%
5%
QLD
Aust
NT
TAS
ACT
SA
NSW
WA
VIC
Source: ABS Census
Non-private dwellings
Non-private dwellings include hotels, boarding houses, nursing homes, student accommodation, prisons and
hospitals. The rate at which the population leaves private dwellings for non-private dwellings will have an
impact on the underlying requirement for new dwellings. Housing Australia’s Future focusses on the demand
for private dwellings.
There were only 23,000 non-private dwellings out of a total housing stock of over 9 million dwellings reported
in Census 2016, or just 0.3% of the market. In the context of housing scenarios to 2050, non-private
dwellings are of insufficient scale to materially affect the outcome, so their impact on underlying requirements
is not included in our housing scenarios.
Demolition and Conversion
The underlying requirement for new housing is increased every time a current dwelling is demolished or a
current dwelling is converted to another use. Conversely, when a current non-dwelling is converted to a
dwelling this helps to meet the underlying requirement for housing. Clearly it is important to take account of
the number of dwelling conversions and the number of knockdown-rebuilds (the demolition of a dwelling that
is replaced by one or more new dwellings on the same site).
The impact of demolitions and conversions is also influenced by the change in household disposable income.
As incomes rise, there is more knock-down and rebuild activity to accommodate rising expectations.
P10 HIA HOUSING AUSTRALIA’S FUTURE 2018Factor #3: Household Disposable Income
Economic and financial conditions can have a significant impact on the demand for new housing. The pace of
improvement in Australia’s living standards also has a notable impact on the demand and type of housing
required in the future.
An obvious economic factor that has an impact on the demand for new housing is interest rates. Rising
interest rates have caused numerous downturns in building activity in Australia, for example in the late 1980s
and after rate rises in 2009. Over the long-term interest rates are not a good variable for indicating economic
conditions.
Gross Domestic Product (GDP) is also not a perfect correlation with building activity. There are instances
where the gross fixed capital formation of new dwellings plays a crucial role in GDP outcomes, such as the
strong building activity cycle around 1994 which followed the “recession we had to have”.
The sentiment of both owner-occupiers and investors is also a key driver of new home building activity and
clearly a variable that is not mutually exclusive to changes in mortgage rates or GDP.
Of the variety of measures that can have an impact on the underlying requirement for housing we consider
household income growth to be a key influence.
‘Wages’ growth influences consumer sentiment and supports consumer’s decisions to invest in housing.
Acceleration in wages growth will increase the demand for upgrading of existing housing stock and/or the
expansion into new housing stock. In short, the wealthier Australians become the more they spend on
housing. For this reason, the growth of household earnings (‘wages’) is an important variable to take account
of.
Using real (i.e. inflation adjusted) household income as a proxy measure for the standard of living, we expect
that a growth in real (household) incomes will generate additional demand for housing through increased
knockdown/rebuild activity, second homes such as holiday houses, larger houses and lower housing density.
In this report we apply three different scenarios for household income growth of – low (1%), medium (3%)
and high (5%) - from 2018 to 2050.
Trend Growth in Household Disposable Income
Source: ABS
9.0%
8.0%
7.0%
6.0%
5.0%
% change
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
Sep-05
Sep-08
Sep-11
Sep-13
Sep-14
Sep-16
Sep-17
Sep-03
Sep-04
Sep-06
Sep-07
Sep-09
Sep-10
Sep-12
Sep-15
Real household disposable income in Australia is experiencing its longest period of sustained weakness in
thirty years. Over the period covering the December 2014 quarter to the December 2017 quarter the rate of
income growth has consistently been below 2.0 per cent.
Over the three years to December 2017 the average rate of household income growth has been just 0.7 per
cent. This rate of growth compares to a post war average of 3.4 per cent and an average over the last thirty
years of 3.1 per cent.
P11 HIA HOUSING AUSTRALIA’S FUTURE 2018During Australia’s largest ever resources boom last decade the rate of growth in real household disposable
income averaged 5.1 per cent, a substantial 2 percentage points faster than the thirty year average. For our
‘high’ income growth scenario we assume a rate of 5.0 per cent.
Our low, medium and high estimates fall within the range of real household disposable income change over
the past 20 years.
P12 HIA HOUSING AUSTRALIA’S FUTURE 2018Scenarios of Future Housing Demand
The unpredictability of future housing demand means that government and industry need to be prepared for a
range of potential outcomes and be nimble in their responses to changes in the drivers of demand. This has
not typically been the case, especially in the delivery of suitable land in both infill and greenfield locations,
which has led to pressures on prices and associated housing affordability challenges, like those currently
being experienced in Sydney and Melbourne. Supplying new housing for a growing population is a lengthy
process.
The scenarios provided in this report for future housing demand are estimates rather than forecasts. Some of
the drivers of housing demand, such as overseas migration, can shift quickly. Others, like the ageing of the
population happen in a more predictable manner over relatively long timeframes.
With this in mind, the conclusion to this analysis brings together the major variables explained before and
provides an indication of the number of new dwellings required to be built, on average each year, between
2018 and 2050, to achieve an equilibrium between supply and demand. The summary of results are shown
below.
From this model we conclude that if household income growth accelerates to the longer-term average rate
and Australia’s population growth slows due to a lower rate of natural population increase, then our ‘mid-
range’ scenario in the table below (Australia’s Future Demand for Housing) comes into play. Australia would
need to build an average of 184,807 new dwellings per annum out to 2050 in order to successfully house our
growing and ageing population.
This model also demonstrates that if Australia's population continues to grow at its current rate of 1.6 per cent
(High population growth scenario) and household income growth remains historically slow then we will need
to build an average of around 215,123 dwellings per year until 2050. To put this in perspective, this volume
of building has only been achieved once in Australia’s history, in 2016.
If the population growth remains at 1.6 per cent and household incomes return to their long-term growth rate
then the number of homes built each year will need to average 232,489. This would mean averaging a build
rate over the next 33 years equivalent to the strongest building boom year in Australia’s history (2016).
This is a major problem for policy makers as the current supply of available building blocks in Australia is
insufficient to sustain this growth and the inevitable outcome will be to push up the cost of land and therefore
the cost of new housing. For example, our ‘mid growth’ scenario for both income growth and population
growth equates to an average of 184,407 dwellings per annum. Even allowing for the current record new
home building cycle this level is 10,000 dwellings per annum higher than the average over this century to
date.
Australia's Future Demand for Housing
Population Growth Scenario
Low Medium High
Population in 2017 24,598,933 24,598,933 24,598,933
Population in 2050 34,286,275 37,317,252 41,402,943
Implied annual population growth rate 1.0% 1.3% 1.6%
Additional dwellings required per annum 114,005 149,675 197,757
Required annual build rate
Low real income growth 131,371 167,041 215,123
Medium real income growth 148,737 184,407 232,489
High real income growth 166,103 201,773 249,855
Source: HIA Economics
P13 HIA HOUSING AUSTRALIA’S FUTURE 2018Housing Affordability: Census Update
From around 2002/03 onwards there has been a persistent imbalance between the rapid growth in Australia’s
population and the slow rate at which new housing stock has been added to the market. This long-running
imbalance between the supply and demand for housing helped produce the rapid acceleration in house
prices and is the underlying cause of Australia’s housing affordability crisis, almost two decades on.
In 2016 Australia built a record number of 233,544 new dwellings. This level exceeded the previous record
set in 1994 by 25 per cent and is 37 per cent higher than the average number of dwellings built this century.
This has resulted in the addition of more than 1 million new dwellings to Australia’s housing stock in just six
years.
HIA estimates that new dwelling commencements numbered over 217,000 in 2017 and will hold up at over
195,000 in 2018.
Total Dwelling Starts – Australia
Source: ABS 8752
65,000
60,000
55,000
50,000
Number
45,000
40,000
35,000
30,000
25,000
Sep-89
Sep-90
Sep-91
Sep-92
Sep-97
Sep-98
Sep-99
Sep-04
Sep-05
Sep-06
Sep-11
Sep-12
Sep-13
Sep-14
Sep-87
Sep-88
Sep-93
Sep-94
Sep-95
Sep-96
Sep-00
Sep-01
Sep-02
Sep-03
Sep-07
Sep-08
Sep-09
Sep-10
Sep-15
Sep-16
Sep-17
Trend Average Jun 1987 - Jun 2012 Average Sep 2012 - Sep 2017
In recent years the most defining change has involved a dramatic increase in the number of apartments built,
particularly in metropolitan areas. The number of traditional detached houses being built has seen relatively
modest growth. Consequently, the downturn in commencements over 2017 was due to a slowdown in new
apartment buildings.
The latest Census results reveal that the fastest growth in dwelling type has been for ‘semi-detached’
dwellings and ‘apartments’. As we noted early in the report, part of the trend towards apartment living has
been households exercising a preference for metropolitan living – inner city or close to a major rail line, for
example. There is also a considerable affordability constraint at work attributable to substantial increases in
residential land prices together with broader increases in fees, taxes and regulations. These factors have
increased the cost of housing at the same time as state planning strategies have promoted consolidation and
have forced a considerable number of households away from their first choice new housing type.
The latest dwelling construction cycle has seen an unprecedented increase in the supply of multi-unit
dwellings. This development has, understandably, only had a modest impact on the stock of housing
measured in Census 2016. Note that the previous Census (2011) pre-dated the latest housing boom.
Census 2016 highlights a: 3 percentage point decline in detached housing stock; a 3 per percentage point
increase in semi-detached housing; and a 1 percentage point increase in high rise apartments3.
3
Changes in the methodology between the 2011 and 2016 Census unfortunately means that the two housing stock charts below are not
completely comparable. There is likely a modest underestimate of apartment stock in the 2016 Census.
P14 HIA HOUSING AUSTRALIA’S FUTURE 2018The Compsition of Australian Housing Stock
Housing Stock - Australia 2011 Housing Stock - Australia 2016
Semi-detached
Semi-detached
10% Detached house
13%
Detached house 72%
74%
Apartment-high-rise
4%
Apartment-high-rise
5%
Apartment - other
10%
Apartment - other
9%
Other dwellings
2% Other dwellings
1%
Source: ABS Census Source: ABS Census
The mix of dwelling types has direct impacts on the type of materials and labour that will be needed in the
future and, importantly, the infrastructure needed to supply appropriate and affordable land for housing.
Over the period 2006 – 2016 the stock of semi-detached dwellings increased by 61 per cent per cent, while
the growth in the stock of apartments was over 70 per cent.
Change in Occupied Private Dwellings Structure from Census 2006 - 2016
Source ABS
80.0%
72.4%
70.0%
60.7%
60.0%
50.0%
% growth
40.0%
30.0%
20.0%
11.6%
10.0%
0.0%
-10.0% -6.3%
-20.0%
Detached Semi-detached Unit of 1-3 storeys Unit of 4+ storeys
The combined detached housing and semi-detached housing market still remains the core of Australia’s
housing stock. The degree to which the structural shift towards apartments is mitigated by a cyclical move
back towards detached housing will form an important element of the profile of Australia’s housing stock in
the decades ahead.
We expect that there will be some ‘return to form’ of detached housing in future cycles, but that the share of
apartments will remain above 20 per cent and the share of semi-detached dwellings will increase to a further,
modest extent.
P15 HIA HOUSING AUSTRALIA’S FUTURE 2018Number of Occupied Private Dwellings by Structures
Source ABS
6,343,421
6,072,545
7,000,000
5,685,388
6,000,000
5,000,000
Number of dwellings
4,000,000
3,000,000
1,129,269
2,000,000
834,109
808,898
797,122
746,768
702,558
463,559
323,170
268,867
1,000,000
-
Detached Semi-detached Unit of 1-3 storeys Unit of 4+ storeys
2006 2011 2016
In the early 1990’s 5 per cent of new housing supply was accounted for by apartments. This share now sits at
around 30 per cent.
As highlighted in the chart below, the new home building cycle has been driven by extraordinary growth in
multi-unit commencements. A key result was the share of apartment commencements increasing from 5 per
cent in the early 1990’s to a peak of 30 per cent in 2016. Based on the latest available data (for the
September 2017 quarter) the share is 27 per cent.
House vs "Other' New Dwelling Commencements Australia
Source: HIA Economics, ABS 8752.0, ABS 8731.0
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
Jun-09
Jun-12
Jun-14
Jun-16
Jun-17
Jun-08
Jun-10
Jun-11
Jun-13
Jun-15
Houses Not yet commenced Flats units or apartments Not yet commenced
Detached house commencements increased by 31 per cent from 89,748 in 2011/12 to 117,497 over the 12
months to September 2016. The record high for detached house commencements is a level of 132,000
achieved in 1988/89.
A compositional shift of this magnitude obviously has a large structural element to it, but there is also a
cyclical element, as noted above.
P16 HIA HOUSING AUSTRALIA’S FUTURE 2018We recognise that the extraordinary volume of new commencements has ensured that for the first time since
2003, the number of dwelling commencements in Australia is effectively fulfilling the needs of Australia’s
growing population.
The latest cycle has reduced a majority of the shortage of supply for housing and the strength and
persistence of the record new home building cycle that began in 2012/13 means that the supply of and
demand for new dwellings is, in 2017/18, the closest to ‘equilibrium’ as it has been in the last 15
years.
Our position that the market is closer to equilibrium now than at any time since 2003 is a subjective
assessment which is also guided by the current price of housing.
The dramatic rise in house prices has been caused by a chronic shortage of supply over decades. The
extremely large new home building cycle that is currently underway has eroded this shortfall and is now
causing more modest price growth. House price growth is closer to CPI than it has been for most of this
century and in some cases is falling in real terms. Price is not the only indicator of equilibrium in the housing
market. We also know from other modelling around population growth and migration that the supply and
demand for housing are now closely matched.
With households’ consumption of housing services changing in response to market dynamics there can never
be a static oversupply (or undersupply). It will always be a moving target.
Even if the supply/demand is (roughly) in balance at the national aggregate level in early 2018, this is not the
case in each state or territory, much less each sub-market within these regional boundaries. Any cumulative
housing oversupply (or undersupply for that matter) is dependent on the point in time when the ‘count’ starts
i.e. the point back in time when it is implicitly assumed that the housing market was in equilibrium.
Some markets, such as in Western Australia and the Northern Territory, are clearly not in equilibrium and
have experienced dramatic reductions in building volumes as a consequence of unique local economic
factors.
P17 HIA HOUSING AUSTRALIA’S FUTURE 2018Conclusion
Housing Australia’s Future growing and ageing population over coming decades is a commanding policy
issue requiring Federal government leadership, close cooperation between the three tiers of Government and
collaboration with the housing industry.
Housing Australia’s Future shows that even under a modest growth scenario to succeed in affordably and
appropriately housing Australia’s future population we would need to build around 10,000 dwellings per
annum more than the annual average number of homes achieved over this century to date.
Ensuring this occurs requires a meaningful response from all levels of government. Housing needs to be a
key focus of government policy encompassing an economic reform agenda to address the excessive and
inefficient cost of new housing supply, together with acceleration in improvements to residential land supply
and approvals processes.
The extent of current inter-government cooperation and current housing policy settings at Federal, state and
local government level will not allow the flexibility required to ensure that Australia builds a sufficient number
of new homes to house the nation’s growing and ageing population and keep future housing cycles within
reasonable range of an ‘equilibrium’.
P18 HIA HOUSING AUSTRALIA’S FUTURE 2018P19 HIA HOUSING AUSTRALIA’S FUTURE 2018
You can also read
