UDIA Victoria Media Release
The Urban Development Institute of Australia, Victorian Division (UDIA Victoria) has released its annual Residential Development Index research, detailing significant headwinds ahead of the industry in the absence of immigration and population growth in the next two years.
The new research into the health of the residential development sector shows that the demand for new housing and industry employment will be significantly reduced if immigration and population inflows are delayed until late 2022.
“Up until March 2020, Victoria’s population was growing by around 115,000 people per year, which was generating a need for around 55,000 to 60,000 new homes per year. This level of activity sustained 194,400 industry jobs, which are critically important to the Victorian economy,” said UDIA Victoria CEO Danni Hunter.
“Depending on when immigration normalises, over the next few years the demand for new homes could fall to around 20,000 to 30,000 new homes per year, and jobs in the residential development industry could fall by an average of 20,000 jobs per year over 3 years,” she said.
“We may see a halving of residential dwelling demand for up to four years if immigration is delayed until late 2022.”
“The residential development sector has been somewhat buffered from the full impact of COVID-19 due to the positive impact of the HomeBuilder and JobKeeper programs, and the Victorian Government’s stimulus measures,” said Ms Hunter.
“Job losses haven’t hit the typical home buying cohort who purchase new dwellings and have mainly fallen on young people who aren’t yet forming families and are primarily still renting.
“Demand has been supported for first homebuyers and those upsizing to a second dwelling with a combination of government grants and more recently, tax cuts in the form of stamp duty savings, while market demand is still being driven by population growth flowing from 2017 to 2019,” she said.
“UDIA Victoria’s research confirm that while there are several issues beyond the control of the Victorian Government, it is critical for the overall economy that support for the residential development sector is a top priority over the next two years to support and bolster the State’s recovery,” said Ms Hunter.
“The stimulus measures contained in Victoria’s state budget will supercharge local demand for new housing by cutting stamp duty, investing in social and affordable housing, and reforming the planning system to deliver new housing supply.
“The Andrews’ Government’s commitment to Social and Affordable Housing will see delivery of $3.2 billion in dwelling investment over four years from 20/21. This will support around 12,000 new dwellings, or approximately 3,000 per year, offsetting around 15 to 20% of the expected decline in private sector stock volumes.
“The prospect of avoiding major impacts from a COVID recession in the residential sector will depend on demand support, made by both Commonwealth and State governments in 2021, including extensions of tax exemptions from the State Government, and JobKeeper and HomeBuilder at a national level,” she said.
Quotes attributable to Luke Kelly, Director at RPM Real Estate Group
- “There are clearly far larger and prolonged headwinds in the apartment and inner ring market ahead. RPM have been fortunate with the grants in place which have targeted the greenfield market. This support has been necessary but will likely be needed to go beyond the March 2021 deadline in the absence of migration.”
- “We anticipate a robust end to 2020, and for the land market to remain strong in the March quarter 2021 while HomeBuilder is in place. After that it becomes a little tricky to outline given the uncertainty around job growth, income support, deferred mortgage payments and any other support.”
- “We are forecasting for an easing in in greenfield activity in 2021/22 in the absence of overseas migrants and a pull forward of owner occupiers into the current market. Clearly, the land market is reliant on overseas migration so the soon the borders can be safely open the better of the market will be.”
- “The RDI update reinforces RPM stance, along with the UDIA, in advocating for additional support through 2021 to prevent the market from going backwards and eroding all that has been achieved to date.”
- “The RDI update is a timely report which allows us to take stock of just how far we have come as an economy but more so how resilient the property market has been. Clearly there are some fundamental challenges that we will face in both the short and medium term, but it has clearly been shown that the industry is up for the fight.”
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Engagement and Communications Manager, UDIA Victoria
M: 0478 415 105