Australia’s Housing Crisis is on the Verge of Imploding

Real Estate Industry Experts Agree Australia’s Housing Crisis is on the Verge of Imploding

Investment Management firm, Payton Capital Ltd, gathered some of the most influential figures in the Melbourne real estate industry for a one-of-a-kind event to discuss the rental, housing supply and housing affordability crisis.

Influential Meeting: Australia’s Housing Crisis is on the Verge of Imploding

The Real Estate Think Tank was attended by senior leaders and directors of organisations from the likes of Marshall White, RT Edgar, Stonebridge Property Group, Abercrombys, Whitefox and RPM, who were asked to participate in an open dialogue on the present housing climate.

Hosted by David Payton, CEO Payton Capital, and featuring presentations from Scott Keck, Chairman of Charter Keck Cramer and ANZ Property Economist, Daniel Gradwell, the meeting of property minds saw the rental crisis, housing affordability and housing supply issues addressed.

At the outset of the event, David Payton emphasised the importance of increased collaboration among real estate agents, developers, government, and financers to help alleviate the housing crisis.

Daniel Gradwell shed light on the current market landscape, drawing attention to the lack of focus on renters. “Renters are often ignored in planning and considerations. Given that one-third of Australians are renters, this is a large part of the community to overlook,” he said.

“Across the country, more than one-third of a household’s income is required to service rent. For the bottom 25% of households in Melbourne, that number is closer to 40%, whilst in Sydney it is closer to 50%, and climbs toward 60% of household income to service their rent in some regional areas,” Gradwell continued.

The rental vacancy rates are nationally sitting at 1%, lower than where a balanced market should be. With the migration floodgates and students returning, this situation is set to get worse.

“Renting appears to be a minefield just to get qualified. Prices are also staggering. Even in the best of circumstances, there will still be a 3–4 year timeline, over which it will be tough for renters,” Scott Keck, Chairman Charter Keck Cramer said. One of the key contributors to constrained supply is changing demographics including a glut of single person households, “there are an estimated 14 million vacant bedrooms in Australia,“ Keck stated.

It was noted that agencies are approximately 30% down on their listings.

Adding to the housing supply woes, Marty Fox, CEO Whitefox Real Estate said “appetite to go to market is drying up, particularly in the middle to upper end market. People sitting in homes that are wanting to transact are reluctant to engage as they cannot be certain of securing a place to live afterwards.”

David Payton, CEO Payton Capital added, “property developers ought to involve local real estate agents from the outset of the planning phase, preceding the engagement of an architect. With the contemporary real estate landscape differing significantly from that of two years ago, real estate agents, being intimately familiar with the local market, hold the most valuable insights to guide adaptations in housing needs.”

Scott Keck referred to a need for Compassionate capital from financiers and investors, allowing more flexible terms in order to fund and activate the projects that are currently stalled. It was noted that downsizers’ introducing their homes to the market won’t solve the problem but they do have a negative chain reaction impact to the market by staying where they are, causing a bottleneck in one avenue of supply.

“To promote swift action, the government should extend incentives to private landlords beyond the build-to-rent sector, as they are poised to contribute immediately given the right motivation. Furthermore, repealing off-the-plan stamp duties would provide a much-needed boost to developers, enabling them to revive stalled projects,” Payton said. The 70:30 policy was discussed, which is a guideline that seeks to shift a higher proportion of new housing development to land within existing infrastructure areas.

The consensus on the 70:30 policy was that the approach is ineffective as councils are underfunded and unable or unwilling to process town planning applications in a timely manner. Infill land is expensive and results in high rise being the only viable alternative rather than single level dwellings and communities with existing amenity.

Peter Grant, Managing Director Business Development at RPM Group, one of the largest land agencies in Australia said “The state Governments push to create 70% of all new dwellings offered to the market within already established suburbs doesn’t directly address consumers requirements for housing sizes, types or budgets.” ‘With an increasing need for new housing due to an increasing population, a decrease in new land approvals will lead to an imbalance in the supply and demand equation in and around the outer suburbs of Melbourne. This all leads to an under supply creating price growth and unaffordability issues,” Grant concluded.

Scott Keck commented “perhaps the real Australian dream could still be achievable as a 130 square brick family home, similar to our heritage. Affordability will likely dictate smaller and less luxurious homes and smaller blocks of land.” There was general consensus that Governments should rethink the 70:30 policy and include more semi-regional and regional alternatives in their future land release to improve affordability, as well as ensure Government is collaborating with town planning experts to improve the issue.

Regarding the role of Government, Payton said Government must foster meaningful engagement with businesses and other governmental entities to overcome obstacles, such as expediting permits, and establishing aligned visions rather than fragmented ones. “Currently, conflicting agendas hinder progress, with initiatives like ‘Big Build’ depleting the labor force, land taxes burdening private landlords and driving rental increases, and steep off-the-plan stamp duties deterring foreign buyers.”

As a result of the discussions, several key next steps were identified to address the challenges and improve the housing situation:

• Collaboration and Knowledge Sharing: Ongoing collaboration among various stakeholders, including developers, government agencies, financiers, and industry experts, should be fostered. The organisation of events, forums, and knowledge-sharing platforms would facilitate the exchange of ideas, best practices, and innovative solutions to improve housing affordability and supply.
• Quality and Design Focus: Developers and development project managers should prioritise quality and design during the construction of housing units and townhouses. By understanding market demographics, the aim is to design homes that cater to the needs of different buyer segments.
• Streamlining Approval Processes: Enhanced collaboration between developers and local councils should be encouraged to streamline the approval process, reducing construction delays and facilitating faster delivery of housing projects.

“Payton strives to deliver compassionate capital, demonstrating alignment and a solution-oriented mindset. With a love for Australian real estate and a steadfast belief in its promising future, we are committed to continue this discussion and seek to make a difference,” Payton concluded.

The Payton Real Estate Think Tank highlighted the commitment of industry professionals to bring about significant improvements in housing affordability and supply in Australia.