Australia is currently in the midst of the strongest period of global economic growth since the late 1960s early 1970s, and while dwelling approvals have fallen, demand continues to rise. And it is this critical housing shortage which will drive an upturn in investor sentiment, according to the latest ANZ Housing Snapshot.
The report shows that while new dwelling approvals have fallen to an annual `completions' rate of almost 140,000, there is an underlying housing demand of almost 170,000, which is consequently driving vacancy rates down from 3.8 per cent to 1.4 per cent in the past three years.
"Chronic rental shortages in all capitals will drive an acceleration of rents which will be the catalyst for improved investor and developer sentiment," the report authors predict.
Other points covered in the Snapshot include:
- The Australian economy has maintained solid momentum into 2007 despite three interest rate hikes totalling 75 basis points in 2006. Higher interest rates have contributed to subdued housing development activity and housing finance approvals.
- With new dwelling supply slipping even further below demand, the housing market will continue to tighten. This will exacerbate already severe rental shortages with vacancy rates in all capitals moving from approximately 4 per cent in 2002 to a portended nadir below 1 per cent in 2007-08.
- This will drive rents significantly higher in coming years.
- Despite a further two interest rate rises forecast for 2007, `pent-up' demand will ultimately need to be satisfied, with critical shortages providing a catalyst for the next upturn in construction.
- In spite of interest rate hikes and difficult housing purchase affordability, 30-year lows in national unemployment and concomitant gains in household income are underpinning a financially healthier household sector.
- House prices continue to escalate (up 8.3 per cent in 2006) and will maintain solid growth in 2007 supported by buoyant household finances, renewed investor interest and tightening housing fundamentals.
The full report is available on the ANZ Bank's website.
