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Despite record levels of home building, Sydney’s housing supply continues to fall behind population growth and is failing to deliver improvements in affordability, a new report shows.
The harbour city is among the worst capital cities in the country in terms of building enough homes to cater to new residents, research from the Australian Housing and Urban Research Institute and the Bankwest Curtin Economics Centre released on Thursday found.
And experts are warning the planning situation in NSW is so difficult it’s leaving developers waiting for more than a year for approvals and dampening efforts to improve affordability with extra supply.
The research, undertaken by a handful of academics including Curtin’s Rachel Ong, found the national housing supply had kept pace with population growth but this was not evenly spread across the country.
Adelaide, Canberra, Hobart and Melbourne had built enough to keep up with their growing populations from 2005-06 to 2013-14.
“Increases in Perth and Sydney’s housing stock over the past ten years have been insufficient to match the increase in their growing populations, with supply-side barriers more acute in Sydney than Perth,” Ms Ong said.
In the past few years, Sydney reached record levels of home building, but still hasn’t kept up with the underlying demand.
And even the homes that have been built were not helping take the pressure off the less expensive segments in the market, despite thoughts that building mid- and high-priced homes would have a “trickle down” impact.
“Our research indicates this isn’t the case, meaning an increase in housing supply is not leading to better housing affordability,” she said.
She said there was a need for targeted government intervention to improve incentives for developers to build at the lower end of the market, such as direct subsidies in areas where affordable housing was needed.
Immigration was blamed as the reason for high house prices by businessman Dick Smith in February.
But Compass Economics chief economist Hans Kunnen said the answer to affordability was “absolutely” still supply and not in restricting population growth, which had economic benefits including driving GDP growth.
“If you’re a Sydneysider, no one questions that there’s an undersupply,” Mr Kunnen said.
But even building at the same rate as the growing population wouldn’t cause prices to fall dramatically, he said.
“It would just help to hold back prices, and after a period of wages growth people would be able to afford to buy.”
He said the answer to tackling the issue of underperforming supply levels could be a combination of infill and a faster release of land, in smaller lots, on the outskirts.
Latest BIS Shrapnel research has forecast Sydney to be the only undersupplied capital city by mid-2017.
“There’s still 50,000 to 60,000 more properties still needed even after a record number of apartments being built,” Mr Kunnen said, blaming planning shortfalls and slow land release.
Chris Johnson, chief executive of developer lobby Urban Taskforce, agreed there was a significant problem on a government level.
“The blame is with the planning system, which is slow and convoluted,” Mr Johnson said.
“There’s a tension between state government saying where new infrastructure and growth is going and local councils [disagreeing].
“This is limbo-land for developers.”
NSW, and specifically Sydney, was the “worst” in Australia for developers to get quick planning approvals, he said. ???