The Housing Industry Association claims the housing market will continue to be affected by a housing supply deficit next year.
Citing the IMF’s view this week that house prices were overvalued by only 10% – in contrast to its earlier calculations of 25% – the HIA said the housing market was supported by fundamentals including strong population growth and high real incomes.
However, HIA’s work on underlying demand indicates Australia will continue to run “large annual deficits” between underlying demand for dwellings and the completion of dwellings, according to HIA senior economist Andrew Harvey.
“So in the longer term Australia’s housing market is underpinned by the immutable forces of insufficient supply and robust underlying demand,” Harvey said.
Updated projections of the underlying demand for housing from the HIA suggest that Australia built 22,000 too few dwellings in 2009/10, with a projected deficit of 16,800 dwellings in 2010/11 and 21,000 dwellings in 2011/12.
“We need to be clear that supply side obstacles which prevent housing construction from keeping pace with the rate of household formation will burden Australians with a growing under-supply of housing and a resultant worsening affordability problem,” Harvey said. “Governments at all levels need to increase their efforts to address these supply side issues as a matter of urgency.”
Harvey said supply-side factors such as the increasing scarcity of land in the main urban centres in Australia will continue to play a major role in driving Australia’s housing prices, a point also raised by the IMF.
( By: Ben Abbott @ brokernews.com.au, 22 Dec 2010 )
