Mar 18, 2020 – 12.00am
A looming housing shortfall could be exacerbated by the coronavirus pandemic, as some consumers put new home-buying decisions on hold, the Urban Development Institute has warned.
While activity in the new housing market picked up in the second half of 2019, following the federal election and loosening of lending rules, the number of housing lots released by developers for sale ended the year down 25 per cent at 35,740 lots, according to the UDIA’s State of the Land 2020 Report.
Total lot sales fell 29 per cent to 28,000 while in the multi-unit market, sales of apartments and townhouses fell 11 per cent over the year to 16,570 units – just over a quarter of the volume of sales recorded in 2015.
In Melbourne – the country’s biggest new housing market – new lot releases fell 36 per cent to less than 12,000.
Sydney’s land market contracted 26 per cent to less than 5000 new lot releases while south east Queensland fell 29 per cent.
That was accompanied by a 27 per cent fall in dwelling approvals in 2019 and a drop in new residential projects under construction, and UDIA national president Simon Basheer said there were already signs – before the coronavirus pandemic emerged – that the gap between supply and demand was widening.
A house under construction in Melbourne’s west.
“We are not yet witnessing substantial impacts from the coronavirus on housing development, in terms of either project disruption or substantial supply chain effects. However, clearly this is watching brief,” Mr Basheer told The Australian Financial Review.
“What remains the great unknown is consumer confidence and what happens to the appetite of buyers to stay active in the market.
“We’d urge governments and regulators to stay active and flexible to ensure lending continues to flow – to both developers and purchasers – both during the next few months and as we re-emerge from the peak of the coronavirus,” he said.
Early signs of a slowdown in buyer demand have already started to emerge with foot traffic falling at many display villages.
Developer Satterley Property Group said about 5 per cent of prospective buyers had indicated they may defer their purchases.
Marketing of new estates has also become harder, with Villawood Properties cancelling the launch event for its latest Melbourne estate due to coronavirus fears.
Should the market rebound after the pandemic eases, Mr Basheer warned of a significant lag between the return of buyer demand and the servicing of it with new supply.
Prior to the outbreak of the disease, the UDIA report highlighted the much stronger activity in the second half of the year.
However, the 117,000 new homes and apartments completed in the major capital cities in 2019 – a fall of 7 per cent on the prior year – was still the lowest number since 2015.
In Melbourne, a 9 per cent rise in new apartment completions offset a sharp fall in new house completions, meaning only a 7 per cent slump in total dwelling supply of 41,000 in 2019.
The price of a median-sized 395sq m Melbourne lot fell 2.6 per cent to $327,000, after sharp rises in the prior two years.
Greater Sydney completed less than 35,000 new dwellings in 2019, a fall of 16 per cent, though still higher then the long-term average.
Over the year, Sydney land prices fell 6 per cent to $459,000 for a 380sq m lot while median multi-unit dwelling prices fell 3 per cent to $700,000.
In south-east Queensland, new dwelling completions fell 11 per cent to below 25,000. SE Queensland offers the best value lots, with a median-sized 428sq m block costing $272,000.
Among the smaller markets, Adelaide new dwelling supply rose 50 per cent, driven by a near-doubling in multi-unit completions and a more modest 12 per cent rise in new home completions.
Perth new dwelling supply rose 5 per cent in 2019, driven by a surge in apartment completions. However, its land market contracted for the fourth straight year to just over 5000 lots.
Greenfield land sales rose more than 50 per cent in the ACT to 1161.