Shortages of listings, rentals and approvals driving the property market: Hotspotting's Terry Ryder
EXPERT OPINION
Multiple factors are driving our real estate markets but it can all be distilled down to this: we have shortages of everything.
Why are prices rising? Because there’s a shortage of listings, relative to buyer demand.
Why are rents rising? Because there’s a chronic shortage of rental properties.
Why are building costs rising? Because there’s a shortage of everything and everybody involved in the creation of new dwellings.
Who’s responsible for these situations? The politicians and bureaucrats who love to tinker at the edges of our property markets but never think beyond the press conference.
These shortages and their consequences create serious issues for Australians and they warrant urgent action. But there’s no evidence that the politicians are even aware there’s a problem.
Rise
They’re all obsessed with the pandemic and haven’t noticed the multitude of tenants who can’t find a rental property at any price or the prospective owners of a newly-built home who can’t proceed because they can’t find an available builder - or the one they have can’t get the materials they need.
We have a serious undersupply of rental properties because investors have been discouraged by a series of decisions and policies by politicians and bureaucrats over the past five years.
Investors have been largely sitting on the sidelines and right now there are more investors selling than buying.
The shortage of rental properties is dire. Most postcodes across Australia now have vacancy rates below 1% and many are closer to zero than 1%.
Anyone who makes a rental property available and stages an open house will have queues of applicants and people offering more than the asking rental.
That’s why rents are rising. Those who react to the symptoms rather than the causes are calling for controls on rents, but that will make the problem worse, by further deterring investors who are an essential part of this equation.
Placing a cap of rentals is no help to desperate individuals and families who can’t find a rental property at any price.
When it comes to building new homes, in desirable locations, there are crippling shortages of everything that forms part of the process. The first issue is getting your foot on a block of land. In many places, everything has been sold and it takes time for developers to create new supply of land that’s ready to be sold.
If you do have a block of land with your name on it, the next issue is trying to find a builder who’s not booked out for the next year or more.
If you have a builder, it’s highly likely they can’t do the job any time soon because they can’t get steel or timber or bricks. Supply chains have been disrupted by the heavy demand and by the pandemic.
This means the cost of building your home is rising by the week. A lot.
If you're fortunate enough to have a fixed price contract locked in, your builder has a massive problem because they may be forced to build the home at a significant loss because their costs are going through the roof, pun intended.
Having the cost and completion date locked into a contract is worth little if your builder goes broke in mid-project.
Who caused this shemozzle? The idiot politicians who patted themselves on the back for bringing in the HomeBuilder handout, but didn't bother to consider the impact that would have on supply chains.
This has become a big problem for everyone in the market – consumers, builders, suppliers, selling agents, buyers’ agents, everyone.
It’s all part of a dynamic mix of factors that is forcing up the price of real estate almost everywhere in Australia.