Australia's so-called housing shortage is a lie constructed by vested interests
Modern journalism is about sitting around twiddling your thumbs, before springing to life whenever a media handout from a company or lobby group comes across your desk.
This is when 21st-century journalists earn their pay. Quickly and expertly, they stylishly re-write the press release. Job done. Then it’s off to the cafeteria for another coffee.
Surveys have found that most of the articles in newspapers today are press release re-writes. I track the output of hacks writing about real estate for big-city newspapers and find that many never stray from the easy-street path of regurgitating propaganda from industry groups. All their articles have just one source: the individual or organization who sent in the press release.
This is how the idea of “a housing shortage crisis” has come to be accepted as fact by media outlets around Australia.
The people who send them press releases say it’s the case, so why would they doubt it.
Here’s the problem. It’s a lie. Not a mistake, but a lie – one that has been carefully and obsessively constructed by vested interests over several years.
There is no shortage. Indeed, all the evidence contradicts it. The evidence is so compelling that there is only one explanation for journalists’ inability to see it: extraordinary incompetence and laziness in equal measure.
The argument put forward, almost daily, by the building industry is that Australia is not building enough new homes. Their talking heads claim there is strong demand but the nation has failed to satisfy that demand, to the extent that we have a shortfall of over 200,000 homes. I keep asking where those 200,000-plus households are living (under bridges? in tents?), but no one has an answer.
Economic laws dictate that this means we should have rising prices and rents. Indeed, given the serious nature of the shortage – usually characterised as “chronic” – prices and rents must be soaring, with double-digit annual growth.
But the opposite has happened. Prices, generally speaking, have fallen in all our major cities over the past two years. Strong demand, a chronic shortage, yet prices have fallen. Have we slipped into a parallel universe?
Vacancies in many parts of Australia tend towards the low side of the 3% mark considered to be a balanced market, but not by a great margin. In “a chronic housing shortage crisis” vacancies would be near zero, but the average across Australia is around 2%, according to SQM Research.
Here’s further evidence: In several of Australia’s biggest residential markets, including Melbourne, Sydney and the Gold Coast, developers are offering incentives to induce consumers to buy their products. Free tropical getaways, new cars, fees waived, all kinds of monetary inducements.
Why? Because they can’t shift their product any other way. There are too many new dwellings and not enough demand.
The weakest part of the “housing shortage crisis” argument is the way the industry comes up with its figures. It compares how many houses have been built with how many “should have” been built. They call this latter figure “underlying demand”, which some media sources accept as gospel but which is, in fact, a piece of self-serving speculation.
The reality is that the number of houses built is dictated by consumer demand. When a first-home buyer secures a block of land and puts in a building application, a new dwelling gets built. If 1,000 new homes are built in a given area, it’s because consumers have directly demanded that number. It’s ridiculous to claim that 2,000 “should have” been built. Where’s the demand for the extra 1,000?
The final nail in the coffin of the shortage argument is this simple question: if the building industry genuinely believes there is unsatisfied demand for new houses, why don’t builders construct more houses? That’s their function in society, isn’t it? Stop whingeing and start building.
But in many of Queensland’s major markets there are already too many dwellings, particularly new apartments and townhouses. The Gold Coast, the Sunshine Coast, the Fraser Coast, Townsville, the Whitsundays and Cairns all fit this category. Prices today are lower than they were five years in many of these places.
In Surfers Paradise, the median unit price has dropped almost 10% in five years. In Noosa, the median today is 22% lower than it was in 2007.
A shortage? Get real.
Recently I saw a stark example of how the shortage propaganda comes to be accepted as fact.
Someone sent off a press release that claimed north-east Victoria was in “a housing crisis”. Population growth was set to far outstrip building starts over the next 20 years. Demand would artificially inflate rents and push many people into tenancies and mortgages they cannot afford. Homelessness and demand on public housing would worsen.
Naturally, The Border Mail newspaper in Albury-Wodonga published it all as fact, under a headline that screamed “Housing crisis to get worse”.
But note that the “housing crisis” and all those nightmarish consequences are nothing more than a prediction by an organisation that consults to the building industry. It’s all based on someone’s forecast that the region won’t build enough houses over the next 20 years. Do they have a crystal ball? A time machine?
I can’t think of a part of Australia less likely to have a chronic shortage than Albury-Wodonga. There’s buckets of land available, with local councils eager to facilitate new development. The Wodonga Council has just published plans for a new town of 35,000 to cater for demand over the next 40 years. Other locales that are part of the twin border cities are projected to grow exponentially over the next 30 years, including Thurgoona and Wirlinga.
So there’s no land shortage. And affordability isn’t a major issue: the median house price for North Albury is $195,000, while Lavington, Wodonga and West Wodonga are all typically priced in the low-to-mid $200,000s.
Housing crisis? This is the worst kind of fiction.
Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.