The State of the Nation’s Housing Report 2022-2023 was released by NHFIC Research in April.
Key findings:
- Strong demand for housing coupled with tight supply of both labour and materials, and bad weather has put significant pressure on the construction industry. Approximately 28,000 dwellings were delayed in 2022. NHFIC’s industry consultation suggests builders are making cost allowances of up to 40% for unexpected delays, up from a more normal 20%.
- In addition to higher interest rates, supply of new housing continues to be impeded by a range of factors including, the availability of serviced land, higher construction costs, ongoing community opposition to development and long lead times for delivering new supply.
- Rental growth and rental affordability varied significantly across and within greater city and regional areas, with rental growth in regional areas now falling after a period of record demand. Rental growth in major cities such as Sydney and Melbourne are outpacing rental growth in regional NSW and Vic, which suggests the premium of living in large cities close to employment centres may be returning.
- Rental affordability has varied greatly across the country during COVID-19. In Sydney, rents in several outer Local Government Areas (LGAs) increased more than 30% from early-2020 to January 2023 and more than 3 times that of some inner-city LGAs. Outcomes in Melbourne have been more subdued, with more than half of Melbourne’s LGAs experiencing rental increases of less than 10% since pre-pandemic. Southeast Qld has had the largest rental rises, with all 12 LGAs experiencing rental increases of 30% or more.
- Trends in the macroeconomy can affect the ability of first home buyers to enter the market. Analysis shows that since the 1990s in Sydney, deposit hurdle rates (i.e. deposit as a percentage of income) on average increased by around 8% during an interest rate tightening cycle (-10% so far this cycle), compared with 26% during easing cycles. The average deposit required as a percentage of annual income has nearly doubled over this period from 60% to 110%.
NHFIC estimates that, conservatively, around 377,600 households are in housing need, comprising 331,000 households in rental stress and 46,500 households experiencing homelessness. Housing need across the country range from 208,200 households in highly acute rental stress to 577,400 households under less acute rental pressure.
