There's little relief in sight for the country's housing affordability with an industry lobby group cutting its forecast growth in new dwellings as investment funds slump.
The Housing Industry Association said that after a ''disappointing'' 130,000 new dwellings were started in 2008-09, an 18 per cent drop from the previous year, new dwelling starts should begin to grow by 9 per cent 2009-10.
However, the industry group cut its growth projections for starts in 2010-11 to 12 per cent from 15 per cent, with commencements attempting to ''catch up with the underlying requirements of Australia's runaway population growth.'' It blamed poorer-than-expected growth prospects in Victoria for the revision.
The partial recovery is not expected to cope with rising demand, some of which is from new migrants, leaving a shortfall of about 50,000 homes until at least 2012.
The projections come the same day rpdata.com released a report showing house rents nationwide increased 3.4 per cent in the 12 months to October, while they rose 4.1 per cent on apartments, driven in part by rising house prices.
Growth to falter
While the HIA is predicting growth in house starts to accelerate this financial year and next, the rate will slow in 2011-12 to 5 per cent.
Although there has been ''some recovery'' for investment in existing property, ''for new dwellings the clear downward trend is alarming'', the report said.
The trend value of lending for construction of dwellings for rent or resale fell by 3.4 per cent in August 2009 to an annual total of $4.67 billion, 37 per cent below August 2008, the lowest in eight years.
And there are risks construction growth will lag even more.
''The risk remains on the downside, thanks to potential supply barriers constraining (or by this stage possible even halting) a housing recovery,'' HIA said.
''The home grown supply side constraints standing in the way of housing a rapidly growing population have, in one sense, little to do with the trajectory of the world economy much less that recent `minor detail' known as the Global Financial Crisis,'' the report said.
Analysts have blamed the slow pace of approvals of building at the state and city level, drawing the attention of the Federal Government which has announced plans to help streamline the approvals process.
The Federal Treasury has project that Australia's population would grow to 35 million by 2049 from its current level of 22 million, with Prime Minister Kevin Rudd supporting a ''big Australia'' in the future.
Regarding the housing crunch, HIA blamed ''some very large supply side obstacles'' stopping new stock closing the gap with demand.
The possibility of rising rates ''perversely makes the job of boosting the number of new dwellings even harder'', the report said. ''So in one sense the whole situation becomes quite circular.''
The Reserve Bank raised rates for the second month in a row in early November to 3.5 per cent with markets tipping another 25 basis point increase next month as a 3-in-4 chance.
Shortage
''We have a housing shortage,'' the HIA said. ''Rising interest rates contribute to slowing down new housing supply and a lack of such supply adds inflationary pressure (in terms of rents and existing house prices) that wouldn't otherwise be apparent.''
The residential investment market continues to looks ''very weak'', said the HIA.
''It would appear that we are not seeing a recovery in residential investment in new dwelling stock and that is cause for considerable concern given the dire lack of affordable rental accommodation in Australia,'' said the HIA.
czappone@fairfax.com.au
BusinessDay
