Supply and demand update

 Late last year the Federal Government’s National Housing Supply Council released its 2011 State of Supply report.

The latest report has been eagerly awaited since the 2010 report highlighted an Australia-wide gap of 178,400 between the supply of and demand for homes in 2009.

The latest report estimates that the nationwide gap worsened by 8,400 homes to 186,000 and, under current medium-level assumptions, it is projected to grow to 640,200 in 2030. Most of that shortage – 300,000 homes – will be in NSW. Victoria will actually have a small oversupply.

There was a small improvement in Victoria between 2009 and 2010. This was due to two factors: a substantial increase in the supply of new homes, from 41,500 in 2009 up to 46,300 in 2010; and a concurrent drop in underlying demand from 52,700 new households in 2009 to 38,100 in 2010. The growth in supply was well above any other state; Queensland rated lowest, with 35,000 new dwellings.

The Council has estimated the dwelling gap in Victoria at 17,600 compared to 22,700 in 2009. Unfortunately, the improvement is not projected to continue.

The Council projects it will increase to 22,900 in 2015 before gradually improving.

These calculations are concerned with the level of underlying demand and this does differ from what is known as effective demand – that is, the quantity of housing that owner-occupiers, investors and renters are able and willing to buy or rent in the housing market.

Currently, we have a small shortage of homes but effective demand is low due to low confidence and the economy.

Source: REIV.com.au