Housing supply will catch up with demand in a few years, parliamentary inquiry told
Millenials should see easing prices on homes in a few years when supply catches up to demand, a parliamentary inquiry has been told.
Younger people are currently paying 7.3 times more for their first property than their parents’ generation.
Record-low interest rates and a rapidly rising population have also caused the housing market to become fiercely competitive.
Treasury’s Macroeconomic Division head Crystal Ossolinski told a parliamentary committee on Tuesday housing supply had not kept pace with population.
“We’ve had some periods of strong population growth in Australia, particularly in the early 2000s, where population growth has risen quite rapidly,” she said.
“Supply in the housing market is constrained … it takes a very long time to build dwellings.”
But she said there had been a strong response to supply issues which should start to ease prices in coming years.
“We‘re going to have relatively strong increases in the number of dwellings,” she said.
“We have had over 200,000 (building) approvals over the past year, and that will play out in supply over the next couple of years.”
Ms Ossolinski also highlighted that interest rates were not expected to drop any further, with the number actually expected to increase within the next few years.
“Those factors point to a period now where we have supply coming in and demand is stabilising or tapering,” she said.
The inquiry also heard that the increase in people studying at university before starting their careers, along with the shift towards contract and casual work was creating barriers to entering the property market.
“The extent to which you work on contracts, or have insecure sources of income is certainly a barrier to getting financed,” Department of Treasury Social Policy Division head John Springer told the committee.
“When a bank looks at somebody as a prospective borrower (for a house) they’re going to assess the credit risk of whether they can repay a loan – obviously the less secure your work is the harder it is to satisfy them.
“Often people who are self-employed or have slightly riskier income profiles go to the non-bank lenders to borrow money.”