Unit demand lifts amid national shortage: CoreLogic

According to CoreLogic, units comprise an estimated 25.9 per cent of national housing stock and around 30.4 per cent of the country’s capital city housing stock, a rise of 19.6 per cent and 22.9 per cent (respectively) since the beginning of 2010.

However, the supply of medium- to high-density dwellings is dwindling and demand is on the rise due to factors such as location and limited land supply easing the release of lower density housing stock, according to CoreLogic economist Kaytlin Ezzy.

Furthermore, a “stronger-than-expected” lift in net overseas migration has caused overall housing demand to skyrocket, with net overseas migration a record high of 454,400 people.

“At the current average household size, this equates to an additional 181,723 households,” Ms Ezzy said.

Additionally, CoreLogic has flagged that the predictions from the National Housing Finance and Investment Corporation (NHFIC) revealed that a national housing deficit is expected, reaching 175,000 by 2027.

Of this shortfall, medium- to high-density dwellings are expected to make up 59 per cent of this amount (103,000).

Building approvals data released by the Australian Bureau of Statistics (ABS) revealed that 4,490 units were approved for construction in July, a drop of 19.9 per cent on the month prior and 39.8 per cent beneath the decade average.

“The medium-to-high density sector is increasingly becoming an important tool in delivering additional housing stock for Australia’s growing population, especially as households continue to congregate in metropolitan areas,” Ms Ezzy said.

“Excluding a handful of volatile months, the trend in new unit approvals has largely held below the decade average since mid-2018 and well below the trend in house approvals since late 2017.

“In the past 10 years, units have accounted for approximately 41.7 per cent of total new housing completions nationally. However, over the March quarter of 2023, units made up just 37.1 per cent of completions, holding around -27.1 per cent below the decade average.”

According to Ms Ezzy, the apartment boom of the 2010s contributed to “persistently low growth in annual rents” in a low and declining interest rate environment, however, the 2020s was not marked by the same rise in construction.

At the moment, an elevated pipeline of units under construction, high interest rates, and low consumer sentiment could temper unit demand and price growth.

“But once the pipeline is worked through, Australia faces a relatively low number of approved projects, which may create a temporary vacuum in new unit supply,” Ms Ezzy said.

[RELATED: Supply solutions yet to materialise in approvals data: HIA]