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How a housing shortage will boost property prices and rents



Research conducted by ANZ Bank has found that there is a potential housing shortage looming for Melbourne & Sydney. 


It is predicted this decline isn't too far away due to the weakness in building approvals for houses and apartments; and might not pick up again until mid-late 2020. 


Remember, the name of the game is “SUPPLY AND DEMAND" and the key metrics you should be following are "BUILDING APPROVALS" and "POPULATION GROWTH”.


Australians population growth has been well above average for a long time now, which means housing demand will remain elevated just based on population alone. Another important element of ‘demand’ is how much money people have. With the credit conditions starting to ease and interest rates continuing to decline, we can assume the demand will be strong in this coming year.

The supply however, is not looking as good, with detached housing relying on the availability of greenfield sites and apartment/building approvals taking longer than previous years. 


The fall will feed through to the housing supply pushing property demand up. Rent is likely to get a boost as well as vacancy rates are predicted to decline over 2020 and 2021.



Home prices are back on the rise and consumer sentiment is looking far more positive.


“If prices continue to rise at the current pace, Melbourne prices will be back to the 2017 peak by February 2020 and Sydney by March”

There has been a sharp improvement in residential activity, which is promising and suggests a recovery in construction in 2020. 

As there are more apartments coming onto the market than ever before this will play a large role residential home property prices. The increased share of apartment approvals will mean that housing approvals also face longer approval time, therefore slowing down the construction process. 


“This could mean that housing cycles become more pronounced over time, with higher highs and lower lows (for both construction and prices)”.

Melbourne specifically can expect the vacancy rate to tighten which is a great result for investors. This will eventually prompt a bigger price and supply response.


The relation to New Home & Land:

If you are slowly seeing less and less titled land available on a developer's price list this is a sign that demand is starting to outpace supply. 


For the 18 months between 2018 and mid 2019 the number of titled blocks for sale was on the increase, this was due to the twin factors of a) sales rates slowing and b) buyers being unable to gain finance and the block being returned to the market at title registration.


From June 2019 to early 2019 land sales volumes have begun increasing and titled stock is being soaked up.


Conclusion

Once developers have sold and settled all titled blocks available on their lists and they begin selling land options 12-18 months out from titled again you will see a direct correlation between the increase in the number of blocks sold, in the bin as they say (due to settle) and land price growth.

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