Affordability crisis eases

The housing affordability crisis that has plagued the residential real estate market and delivered double-digit price growth for property investors is expected to ease over the next quarter, research shows.

A period of stable interest rates, due to the Reserve Bank of Australia’s efforts to settle consumer confidence and business sentiment, should bring “a brief but much needed period of respite”, PRDnationwide’s Quarterly Economic and Property Report shows.

The report says the number of new dwellings coming onto the market decreased during the March 2010 quarter by 7.7 per cent (39,112 new homes across Australia), but compared with the previous year, new dwellings increased by 39.7 per cent.

Investors are now taking up a larger portion of the market as activity from first-home buyers remains soft.

“Investor financial commitment has now reached $8 billion and has not been this strong since June 2007, when property prices were at their peak,” PRDnationwide managing director Jim Midgley says. “Investor finance now accounts for 36.8 per cent of all financial housing commitments and has not had such a large portion of the market since December 2003.”

Investment is forecast to continue to grow strongly during 2010 and 2011, with “empty-nesters” expected to drive demand.

“It is anticipated that dwelling investment is set to grow by 7.5 per cent during 2010 to 2011,” report author Aaron Maskrey , PRDnationwide research director, says. Empty-nester baby boomers will drive the greatest demand for new homes over the next 25 years, he says.

Sydney and Perth are forecast to receive stronger house price growth during this year.

On a state-by-state basis, Victoria continued to record the highest number of dwelling commencements during the March quarter of 2010, representing 34 per cent nationally. NSW followed with 21 per cent of commencements and Queensland experienced 17 per cent of starts.

The Australian rate of population growth remained steady at 2.4 per cent during 2009.

The Australian Bureau of Statistics predicts that 4 million new homes will be built during the next 25 years, as the number of households is set to rise to 11.8 million in 2031.

BRW

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