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ABC News
a day ago
- Business
- ABC News
Cotality warns building industry can not keep pace with building approvals in race to fix housing crisis
A leading property researcher has questioned the state and federal government approach of speeding up building approvals to boost housing supply, warning that the construction industry simply cannot keep pace. While data shows home approvals are starting to gather pace from a low base, Eliza Owen from Cotality (formerly known as CoreLogic) worries a construction bottleneck could drive up costs and flood the market with poor-quality homes. She said the current focus on accelerating building approvals could cause more problems than it would solve without more construction sector capacity. "It's like turning up the water pressure on a bath that's already full," she warned. "With completion times already above average and construction costs elevated, it seems an odd time to be incentivising more dwelling approvals and commencements. "There's a lot in the pipeline. The building industry is stretched thin." Ms Owen pointed out that the average time between commencing construction on a unit block and completing it had blown out from around six quarters (about 18 months) a decade ago to more than nine quarters (about 22 months). It is a similar story for townhouses and detached homes, where construction times have increased from around 10 and seven months respectively to 13 and more than 10 months. Ms Owen's observations come as Housing Minister Clare O'Neil hosts meetings with industry groups to thrash out how to achieve the federal government's target of 1.2 million new homes by mid-2029. Housing Industry Association chief executive Simon Croft, who was at Ms O'Neil's roundtable meeting on Tuesday, said it was "really important to have a target — an ambitious target" but "the numbers are saying [1.2 million homes in five years] will be a very significant ask". Last month, accidentally leaked advice published by ABC News showed Treasury had been warning the government its signature housing policy target would "not be met". Mr Crost said Australia needed many more skilled tradespeople — including carpenters, electricians and plumbers — if it was to have any realistic hope of meeting the 1.2 million new homes goal. The Albanese government's plan includes buildings funded by the private sector — developers, investors and owner-occupiers — plus a smaller number of government-funded homes. Cotality's analysis showed the closest Australia has come to a similar rate of building was at the end of 2019, when 1.04 million homes were built in five years. However, Ms Owen pointed out that interest rates were much lower over that period and investor activity was higher, especially among overseas buyers. "It's too hard to build a home in Australia," Ms O'Neil said in a statement. Ms Owen analysed national data about properties being built and applications for new homes. She found completion rates were hovering around 890,000 over five years, well below the mid-2029 target of 1.2 million. Ms Owen says the number of people looking to build would rise further if the Reserve Bank of Australia dropped interest rates, as expected this month. However, she noted the building industry would be hard-pressed to respond to extra work. Mr Croft said the round table with the housing minister was focused on the skills shortfall, as well as ways to respond to demand, including changing construction codes and other regulations, and "modern methods" to build faster, such as pre-fabrication and 3D printing. Master Builders Australia's (MBA) chief executive Denita Wawn, who missed the minister's round table but was briefed by a representative, noted the emphasis on supply and said the MBA was also focused on easing infrastructure issues that could hold up housing developments, like a lack of sewerage or roads. "You've got horrific stories of effectively stranded suburbs," she said. Ms Owen doubted supply issues could be fixed in time to meet the mid-2029 target. "It's clear that under-construction is where you have the biggest hold-up," she argued. "Approvals will start to rise when interest rates come down. Mr Croft disagreed, saying inflation in the building sector had eased since the pandemic, when materials such as timber soared in cost. Ms Owen was also concerned that pushing for 1.2 million homes could lead to poorer-quality builds, which she said was a problem during the last development boom up to 2019, with many apartments in particular plagued by serious defects, from flammable cladding to leaks and even structural flaws. "More dwelling completions are not necessarily a mark of success for Australia's housing market," she argued. Instead, Ms Owen called for more focus on easing demand, including dropping tax concessions for property investors. This week, the union movement reignited the debate around negative gearing, with ACTU secretary Sally McManus calling for a one-property limit. "The supply side is fraught," Ms Owen says. Ms Owen believes discussion around reducing demand is increasing after "politically a lot of hesitancy" but that there needs to be more focus on this side of the equation. "I think it's fair to say that wealthy lobby groups like developers have an interest in making the supply side more feasible," she added. Ms Wawn slammed calls to reduce housing demand and described the ACTU's latest push over negative gearing as "disappointing". "It's a totally wrong call about resolving the housing crisis," she said. A federal government spokesperson said the Commonwealth was "realistic about the factors beyond [its] control" when it came to the 1.2 million housing target, such as the current level of interest rates. "The homes target is not just ambitious — it's essential," the spokesperson said. "This crisis wasn't created overnight, and it won't be fixed overnight — but real progress is being made right across the country."
ABC News
2 days ago
- Business
- ABC News
Australia's housing market would crash if these factors aligned
An Australian property market crash may be laughable, but it's conceivable. Housing is politically sensitive because access to it influences our lives enormously. The Albanese government is attempting to ramp-up housing supply, and is offering shared equity schemes to make housing more affordable. "That's part of the issue is politically it is very difficult to introduce [new] big bang policies that may actually have some sort of impact on house prices because a lot of people are going lose out," Ben Phillips, an associate professor from ANU's Centre for Social Policy Research, says. A property price crash, of course, would make many millions of homes more affordable. But is that realistic, or even possible? Australian property prices have faced three major speed bumps over the past four decades. The share market crashed in October 1987, leading to an economic downturn, which saw the unemployment rate rise to 10.8 per cent. It hurt asset prices including property. Australia's two largest cities saw the biggest falls, with house prices falling 10 per cent in Melbourne, and roughly 9 per cent in Sydney between 1989 and 1991. In the global financial crisis of 2008, Australia's median property price fell by around 8.5 per cent over an 11-month period, according to CoreLogic. The COVID-19 pandemic, decades later, saw the unemployment rate reach 7.4 per cent in July 2020. Phillips says that "didn't really have much impact". What would likely lead to a property market correction, and potentially a crash, analysts say, is a spike in Australia's unemployment rate. The latest official data from the US shows a shock slowdown in American bosses hiring new candidates. A spike in the unemployment rate here in Australian is not inconceivable. "I think you'd need to have some sort of an event — and I don't quite know what that would be — that would lead to a lot of people losing their jobs, who are professionals and who own houses," Phillips says. Independent economist Saul Eslake has a clearer picture of what that "event" would look like. "So if, for example, Australia were to be hit by some external shock emanating, for example, from the United States or China, that prompted unemployment to rise significantly," Eslake says. Cotality's head of research, Eliza Owen, agrees. "So the unemployment rate is probably the thing that's holding [the property market] together," Owen says. "If we saw a big blowout in the unemployment rate, that's when mortgage serviceability becomes less stable, less certain. "You might have more forced sales and that would add to supply and contribute to a blowout in falling home values." While not putting any numbers around what would cause an Australian property market crash she says: "It would have to be a combination of demand shock and a large increase in unemployment." "So that probably comes from a severe economic downturn." Eslake adds that a combination of interest rate hikes and a severe cut to the migration intake would be necessary for a "demand shock" to the property market. The bottom line is that any economic or financial event would need to be deep and long-lasting, economists say, to produce a property market correction or crash. But Phillips notes that many home owners are well ahead in their mortgage repayments and have managed their finances to help ride out a financial storm. "Most people in Australia are pretty wealthy and if you're a home owner, and those are most of the people who are buying and selling houses are actually home owners — they have large amounts of equity, they've got large redraw facilities to survive during any sort of challenging financial times," he says. Phillips says this, and a chronic shortage of housing, has made Australia's housing market virtually indestructible. "And I think particularly through an environment where you've got quite low interest rates and you've got effectively a fairly fixed level of housing supply and certainly in the short term, that's probably why it's then house prices stay as strong as they have or increase increased quite strongly." Eslake argues the government and the Reserve Bank stand at the ready to respond to any economic event which poses a threat to financial markets. "I think the Reserve Bank would cut interest rates significantly," he says. In addition, he argues, the big four banks, in the event of a big endogenous economic shock, would fall over themselves to help mortgage borrowers avoid foreclosure. "Most banks will, if a mortgage customer loses his or her job, comes forward quickly enough and the bank's persuaded that there's a reasonable prospect that that person will find a job in the next six months, [the bank will] go to considerable lengths to help those customers," Eslake says. "The banks certainly don't like to have mortgagee and possession signs going up in front of their customers houses." So, is a property market crash possible? Of course. Is a correction more realistic? Yes. But you would need some combination of a drastic cut to migration, interest rate hikes, and a significant and long-term jump in white-collar unemployment with little government support. It's a tall order.
Sydney Morning Herald
5 days ago
- Business
- Sydney Morning Herald
‘Great place to live': The Melbourne region where home sellers made the most money
Although Melbourne was one of the least profitable capital cities for property resales during the March quarter of 2025, one local government area stood out with the highest median profit. According to the latest Pain & Gain Report from Cotality (formerly CoreLogic), 11.3 per cent of all Melbourne home sales were loss-making in the March quarter. However, sellers in the City of Bayside local government area (LGA) made a median profit of $608,000, the highest average profit across all Melbourne regions. This was almost $80,000 above the second most profitable LGA, Nillumbik Shire, at $528,500. In third place was Manningham Council, with a median profit of $520,000. Bayside is home to 'blue-chip' suburbs including Brighton, Sandringham and Hampton, and this contributes to why it made the most profit, said Eliza Owen, Cotality head of Australian research. 'Because it contains blue-chip areas of the Melbourne market, over time, because of their desirability and scarcity of housing, it has accrued a lot of value,' she said. Owen said this return had been consistent despite slower growth rates in the area. 'Because it is inherently a blue-chip market, it reliably returns very decent profit, particularly for house owners who have been in the area for a long time,' she said. The median hold period in Bayside for profit-making sales – the period during which a home is owned before selling – was the longest of Melbourne's LGAs, at 13.4 years.
The Age
5 days ago
- Business
- The Age
‘Great place to live': The Melbourne region where home sellers made the most money
Although Melbourne was one of the least profitable capital cities for property resales during the March quarter of 2025, one local government area stood out with the highest median profit. According to the latest Pain & Gain Report from Cotality (formerly CoreLogic), 11.3 per cent of all Melbourne home sales were loss-making in the March quarter. However, sellers in the City of Bayside local government area (LGA) made a median profit of $608,000, the highest average profit across all Melbourne regions. This was almost $80,000 above the second most profitable LGA, Nillumbik Shire, at $528,500. In third place was Manningham Council, with a median profit of $520,000. Bayside is home to 'blue-chip' suburbs including Brighton, Sandringham and Hampton, and this contributes to why it made the most profit, said Eliza Owen, Cotality head of Australian research. 'Because it contains blue-chip areas of the Melbourne market, over time, because of their desirability and scarcity of housing, it has accrued a lot of value,' she said. Owen said this return had been consistent despite slower growth rates in the area. 'Because it is inherently a blue-chip market, it reliably returns very decent profit, particularly for house owners who have been in the area for a long time,' she said. The median hold period in Bayside for profit-making sales – the period during which a home is owned before selling – was the longest of Melbourne's LGAs, at 13.4 years.
Business Times
6 days ago
- Business
- Business Times
Australia's home prices climb further as rental growth refuels
[CANBERRA] Australian home prices climbed for a sixth straight month with every major city reporting gains, while signs of resurgent rents are set to stretch the budgets of households in this segment. The Home Value Index advanced 0.6 per cent in July, property consultancy Cotality said in a statement on Friday (Aug 1). Darwin was once again the top gainer, climbing 2.2 per cent, while the bellwether Sydney market rose by 0.6 per cent. 'The outlook for housing values remains positive,' Cotality said in its report. 'We expect values to continue posting a broad-based but modest rise through the rest of the year, supported by an outlook for lower interest rates, improving sentiment and short housing supply.' Money markets are pricing a rate cut at the Reserve Bank's meeting this month as almost certain after inflation data two days ago showed an across-the-board cooling of price pressures. Still, Cotality highlighted affordability constraints and lingering uncertainty as constraints to a more rapid uptick in property prices. On the flip side, a persistent lack of supply is supporting home prices alongside expectations of further rate cuts. In the past three months, national house values have risen by 1.9 per cent, adding approximately US$10,800 to the median value. Data to March show the national dwelling value to household income ratio, at 7.9, is just shy of record highs, according to the report. Rental vacancy rates are also holding close to historic lows, at 1.7 per cent nationally in July, Cotality said, adding there has been some evidence of quickening growth trends. 'The reacceleration in rental growth is clearly bad news for renters, where the median income household would already need around a third of their pre-tax income to pay rent,' said Tim Lawless, research director for Cotality, formerly CoreLogic. 'Renting households have historically skewed to younger, lower-income cohorts, so no doubt the sting of high rents is having an even more acute impact on household budgets.' BLOOMBERG
