Is Victoria’s housing supply about to get better – or worse?

Financial Planning, Investing, Lifestyle
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Just about everywhere you look in Victoria, you’ll find someone struggling with housing – whether they own, want to buy, need to downsize, aspire to build, or are looking to rent.

This is a grim snapshot of the current situation.

Melbourne has the fourth least affordable housing market in the world, with a median dwelling price of $778,000 as of October – up 2.4 per cent year-on-year.

Leasing is just as costly. The median house rent has surged 20 per cent this year to hit $700, while the median unit rent of $520 is up by 15 per cent.

Less than one per cent of all rental properties in the Victorian capital are deemed affordable for people on income support payments.

More than 48,000 people are on social and public housing waitlists, with 25,000 of those in urgent need of assistance. Victoria has the smallest proportion of community housing in the country at just three per cent – more than a percentage point below the equally dismal national rate.

Women aged 55 and older are the fastest-growing group falling into homelessness. One-third of all Aussies without a roof over their heads live in Victoria and the number increased 24 per cent in the five years to 2021.

In response, the Victorian Government has released a Housing Statement that sets an ambitious goal of building 800,000 new homes across the state in the next decade.

Is it possible?

So… will it meet the target? In my opinion, it’s highly unlikely.

To put it bluntly, Victoria has never built anywhere close to 80,000 new dwellings in a single year. That target is more than 12,000 homes above the record that was set during the building boom of 2017.

In that frenzied year, builders pumped out a staggering 35,000 homes and 32,500 units in just 12 months. Last year, just 56,899 dwellings were constructed.

The Housing Industry Association conservatively estimates it will take three years of hard work to ramp up to the 80,000 new dwellings annually needed to reach the government’s milestone.

And even then, how many people will be able to afford them?

It will take a family with a typical household income almost a decade to save the 20 per cent deposit needed to buy a home. Until then, they’ll fork out a huge chunk of their salary on increasingly unaffordable rent, in a market being strangled by a chronic shortage of supply and ever-growing demand.

No policies, few ideas and zero concrete solutions from our State Government

There are no policies, few ideas and zero concrete solutions to get more people into a home cheaper and quicker. The Victorian Government’s strategy has been compared to US President John F Kennedy’s ambition in 1961 to put a man on the moon by the end of the decade.

The only problem is Victoria hasn’t thought about how it might build a spaceship. In fact, under this analogy, it hasn’t even figured out where the moon is in the sky.

There’s no doubt that building a whole lot of new homes will help with supply and ease the upward pressure on prices.

But ask anyone trying to build a home in Victoria what it’s like. Whether they’re a young couple with a house-and-land package or a billion-dollar developer putting up a skyscraper, they’ll tell you it’s a nightmare.

At the moment, it takes on average seven-and-a-half months to obtain planning approval to build a house in Victoria, which is the slowest in the nation.

Finding an available builder is like sifting through a haystack that it turns out never concealed a needle in the first place. The cost of materials remains high and supply chain issues persist.

A shocking number of builders have gone bust over the past few years and those who remain can’t keep pace with demand. There’s great uncertainty in the industry because of wildly changing legislative and taxation frameworks. The appetite for risk is very low. 

Why would people invest in Victoria?

And all the while, the Victorian Government is pleading for more homes to be built in one breath and then attacking property investors in another.

Dozens of new and increased taxes have been levied on the property and real estate investment sectors by this government. Developers are being slugged with hefty surcharges and landlords are copping a seemingly endless barrage of rising costs (and that’s on top of restrictive tenancy reforms), none more so than the land taxes being levied against property investors to “reclaim” Government waste over the Covid era.

It’s beyond doubt that the government sees those in the property game as cash cows from which to extract every available cent to repair its enormous budget blackhole.

Only a small percentage of people would truly feel “wealthy” through their property investments. No, most are Mums & Dads struggling with rising costs of living and investing simply to give them an even chance of being able to enjoy some wealth in the future. 

If the government is truly serious about building 800,000 new homes, then it sure isn’t acting like it.

Nothing that’s been done or promised thus far gives anyone cause for confidence. Developers are unlikely to rush to the party in a significant way, while mum-and-dad investors are being forced out entirely, crushed beneath the merciless weight of greed.

At the end of the day, those who suffer will be young Australians unable to afford a home, renters paying more and more for a place to live, and the most vulnerable in the community who are barely hanging on.

What a shameful plight Victoria faces.

Finding a great broker requires a little effort on your part, but it will pay handsome dividends in terms of finance success. If you’re looking to secure funds for your next purchase, why not reach out to our team at Intuitive Finance for a chat.

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Andrew Mirams