Auction numbers for September are at healthy levels with 670 auctions being reported to the REIV over the weekend. 379 sold at auction, 130 sold before auction and 161 passed in resulting in a clearance rate of 76%. There were an additional 223 private sales. In comparison, for the same time last year, there were 702 auctions producing a clearance rate of 70%.
National Cabinet has put out a response in regards to Australia’s housing crisis pledging to build 1.2 million new dwellings over a five year period commencing 1st of July, 2024. All sounds great in theory, but in reality, it’s a target that is likely to be impossible to achieve.
An article by Leith Van Onselen in marcobusiness.com.au summarises it well but some main points as follows. According to the OECD (Organisation for Economic Co-operation and Development), Australia is already building more houses per capita than most countries (that are part of the OECD) with Australia’s 40 year average home construction pace being 160,000 per annum. National Cabinet has set a target of 240,000 per annum and the most the country has ever built in one year is 223,000 in 2017.
Interestingly, the Governments (Federal and State) are hoping to achieve these targets through developers with easing planning and zoning laws to allow for greater density. The Albanese Government’s contribution is set at 30,000 dwellings which is only 2.5% of the total target.
On the demand side, immigration is putting huge pressure on the housing market, both for buying and renting. Australia’s population is predicted to grow by 2.18 million people over the next five years of which 1.5 million is predicted to be from immigration.
With no financial incentives for developers to build more, construction costs sky high and profit margins low, it seems an impossible target that the amount of homes needed to keep up with housing demand will be achievable. Developers will not want to flood the market with stock as their incentive to build projects is to make money. Flooding the market will diminish profits.
With an unattainable supply plan and without a fix on demand, property prices and rents will likely to continue to rise as demand continues to outstrip supply.
14 James Street, Surrey Hills went to auction over the weekend. The auction of the unrenovated, three bedroom, one bathroom home on 623 sqm attracted 3 bidders at auction. The auction was very slow and the bidding commenced on two vendor bids, $1,800,000 and $1,825,000 until one party jumped in. The property ended up selling for $2,162,500 with the property being announced on the market for $2,000,000.
In Geelong, an ex commission house went to auction which required a lot of work (was unliveable) but the property was on 624 sqm of land. The auction of 19 Irwin Court, Whittington attracted 4 bidders with the property announced on the market for $350,000 and selling for $385,000.
Have a great week!