Residential shortage to last at least two decades: Developer
Australia can expect a shortage of residential property for the next two decades as developers face barriers to lifting supply, according to AV Jennings managing director Peter Summers.
Population growth and increasing demand for housing, coupled with years of under-building have lead to shortages of new residential property, but government land release policies made it difficult for developers to catch up and meet demand increases, Summers said.
“It’s something that I think Australia will be struggling with for 10 or 20 years,” he said in a teleconference discussing the company’s full year result last week.
Low interest rates, low inflation and improving sentiment were adding to demand from consumers.
“In residential, consumer confidence is as high as it has been for many years. There’s a willingness to transact and engagement is as high as we’ve seen,” Summers said.
He was not concerned about the prospect of interest rates rises, which are forecast by many economists for next year.
“The main driver in this market has been consumer confidence and that’s about job security,” he said.
Consumer anxiety was down even though unemployment had risen, he said.
Forward indicators such as investor and first home buyer demand had also improved. First home buyers accounted for 13.2% of new housing loans in June, up from 12.6% in May, Australian Bureau of Statistics figures show.
Housing affordability was still a concern for many buyers but this was moderated by limited price growth on the urban fringes of capital cities and government incentives, Summers said.
AV Jennings plans to focus on affordable housing by maximising land utilisation at its project sites.
The group, which concentrates on building low-rise homes and town houses, plans to move more into medium rise apartments, although Summers said it was not likely to start building highrise apartments.
AV Jennings announced a profit before tax of $27 million for the 2014 financial year, up from a $23.3 million loss the year before.
It had 1,415 contracts signed over the year to June 30, 2014, up from 819 at the same time in 2013. There were 1,254 settlements in the 2014 financial year, compared with 829 the year before.
The company forecast there would be between 1,500 to 1,700 lot settlements in the 2015 financial year as the number of sites under development had risen dramatically.
Work in progress at 30 June, 2014 was 77% higher than in 2013 and 298% higher than the level two years ago, the company reported.