The construction of new private sector houses accounted for 2.3% of the total decline in the December quarter, with the ABS revealing new private sector house commencements fell to 28,330 dwellings.
- Total dwelling commencements fell 6.7% to the December quarter.
- Over the course of 2022, total new dwelling commenced fell 21.9%.
- REIQ calls for foreign investor taxes to be abolished to help generate more investor activity, theoretically boosting supply.
- Other property pundits say the root cause of the rental crisis needs to be addressed - supply.
Further, other new residential commencements within the private sector fell 16.5% to 12,053 dwellings.
Over the course of 2022, total new dwelling units commenced fell a staggering -21.9%, courtesy of the conclusion of government stimulus incentives such as HomeBuilder and rising interest rates.
PropTrack Director of Economic Research Cameron Kusher detailed 12,518 house commencements were made over the December quarter, the fewest house commencements since March 2012.
“And for the 12th consecutive quarter we've completed less than 50,000 dwellings,” Mr Kusher said.
“Remember we have to be able to hit 50,000-plus completions for 20 consecutive quarters to build the mooted one million homes by 2029.
“We don't have to start until 2024, [but] this remains a pipe-dream in my honest opinion.”
The million-home target formed part of the Federal Government’s National Housing Accord announced last year, designed as a measure to ease housing supply issues.
Under the Accord, most of the million dollar property target will rely largely on funding from the private sector, yet the latest ABS figures show the private sector is not in a rush to boost supply.
When the policy was announced, Propertyology Head of Research Simon Pressley said the aim was neither ambitious nor over the five-year average.
"We've got the single worst housing supply crisis in Australia's history and it's entirely caused by all three levels of governments and various government departments," Mr Pressley told the Savings Tip Jar podcast in November.
"They have suppressed the volume of rental supply that's required to hit the market. And here we are today with people living in cars and caravans and tents."
Queensland real estate body calls to drop foreign investor surcharge
The Real Estate Institute of Queensland (REIQ) believes rescinding foreign investor surcharges can help boost housing supply across Sunshine State.
REIQ CEO Antonia Mercorella said additional taxes on foreign investors – who are already being taxed at a Federal level - act as a deterrent for capital to be deployed in Queensland.
“When the Labor Government introduced additional surcharges for property transactions from foreign buyers, the REIQ called it out as a cash grab which would deter desperately-needed property investment and would slam the state shut for business,” she said.
“With about 36% of people in Queensland living in rental accommodation, the supply of rental properties is crucial, and therefore we need investors – both local and foreign – to make important contributions to the stability of the rental market,” Ms Mercorella said.
Housing Industry Association Queensland Executive Director Mike Roberts said the policy introduction coincided with the volume of new apartments commencing construction falling by 47% since 2016.
“Foreign investors can only buy new homes, not established homes. They cannot take the apartments overseas with them, and therefore are increasing the stock of housing,” Mr Roberts said.
“For this reason, they have a critical role in increasing the supply of new housing, especially apartments in south-east Queensland.”
Queensland first introduced a 7% surcharge to stamp duty in October 2016, as well as an additional 2% per cent surcharge in 2019, applied to land tax on Queensland property held by foreign entities.
Under recent changes by the Queensland Government to entice investors into the build-to-rent space, build-to-rent developments are exempt from the 2% foreign investor surcharge for 20 years, alongside a 50% reduction in land tax.
But would dropping a surcharge actually solve the problem at hand?
Given the combination of lack of housing supply and rental price pressures, Mr Pressley said good policy focuses on the root cause of a situation, not the heartstrings.
“The root cause is grossly insufficient supply – a byproduct of numerous poor policies introduced by political plonkers,” Mr Pressley said.
“More supply, not the price of rent, must be everyone’s primary focus.
“It fails logic to address the rising price of any essential commodity by cutting off the hand that feeds the mouth.
“Electricity, fruit and vegetables, meat, fuel and other things have all gone up significantly in price. Would anyone think it appropriate to go and punish all of the farmers and food manufacturers because the grocery bill has increased? No, we recognise the issue is a lack of supply and the intelligent response is to implement initiatives to support more supply.”
Mr Pressley noted 96% of Australia’s total rental pool is funded by everyday Aussie investors and the remaining 4% of government-funded rental supply reduces every single year.
“It is the government’s responsibility - not the rental supplier’s responsibility - to support the genuinely vulnerable without adversely affecting innocent others,” he said.
PRD’s Alternative Housing Supply Solutions report released in February revealed five alternative solutions to boost housing supply in the next decade, including public private partnerships, modular homes, build-to-rent, asset repurposing and community-based land initiatives.
PRD Chief Economist Dr Asti Mardiasmo believes Australia can draw upon solutions from other countries in alleviating housing undersupply.
"Our government system is such that each government level has autonomy in their housing strategy," she said.
“Therefore unfortunately there is not just one ‘perfect’ solution, but it is more likely that we will need to have a multi-faceted solution with a combination of two or three solutions.”
Australia’s peak construction body echoes this sentiment, with Housing Industry Association’s Tim Reardon detailing every state and territory needs to take action to attract more investment in the housing sector to improve the supply of new homes.
This comes as the National Housing Finance and Investment Corporation revealed within their State of the Nation Housing 2022-23 report that around 180,000 new households are expected to be built each year.
However, fewer than 150,000 new homes will commence construction each year for the next two years.
“Over the decade, this will see an expected 79,300 shortfall in the supply of new homes,” Mr Reardon said.
“This will see the acute rental shortage worsening and unnecessarily high increases in home prices.”
"Dwindling building activity further exacerbates housing supply issues" was originally published on Savings.com.au and was republished with permission.