Sky high demand for units but approvals remain in the doldrums

High density housing supply will fall significantly short of demand by 2027, CoreLogic predicts, leaving first homebuyers and investors out in the cold.

The CoreLogic Property Pulse report, authored by economist Kaytlin Ezzy, said the State of the Nation report released by the National Housing Finance and Investment Corporation forecast a national housing deficit of 175,000, with a 59 percent shortfall in unit supply.

Ms Ezzy said this comes as the market is increasingly turning to high density housing as a solution to Australia’s residential supply woes.

“The continued reliance on the unit sector to deliver fresh housing stock is particularly evident across some of Australia’s largest capitals, including Sydney and Melbourne, as well as the ACT, where limited land supply has made further development of low-density dwellings increasingly difficult,” Ms Ezzy said. “The medium to high-density sector is increasingly becoming an important tool in delivering additional housing stock for Australia’s growing population, especially as households continue to congregate in metropolitan areas.”

According to CoreLogic estimates made in August, units account for 30.4 percent of capital city housing stock. However ABS data shows a continuing decline in construction approvals, with July figures recording a -19.9 percent fall compared with the previous month and -39.8 percent below the decade average.

Ms Ezzy said the trend was set to continue.

“Despite surging demand, developers and consumers alike are exercising a more cautious approach in light of uncertain economic conditions, weaker capital gains, high construction costs, a tight labour market for trades and rising interest rates,” Ms Ezzy said. “With fewer unit projects set to move through the construction pipeline, it’s likely completions will continue to ease, with units making up a smaller portion of new housing stock over the coming years.”

While current concerns among buyers in regard to higher interest rates and an uncertain economic outlook have kept the lid on prices despite growing demand, Ms Ezzy said that could change next year.

“With the cash rate potentially easing in 2024, greater purchasing demand could fuel a stronger price boom in the unit market at this time,” she said.

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Sky high demand for units but approvals remain in the doldrums

As the cash rate eases, demand for this increasingly popular housing choice is set to soar

Atlas Real Estate is reimagining how people connect with property, combining listings, market insights, local stories and lifestyle content in one destination for those buying, selling or simply exploring the market.