Increasing supply is the missing piece in the puzzle when it comes to tackling housing affordability, according to one of Canberra’s biggest developers.
Geocon managing director Nick Georgalis said “demand-side policy fixes” such as early access to superannuation and tax concessions would only push prices up.
“It’s a very simple dynamic: if you increase demand it puts the pressure on the supply and the real solution is to increase the supply to meet the demand,” Mr Georgalis said.
While there is plenty of development taking place across the city, Mr Georgalis said most of these apartments have already been sold.
Geocon’s Braddon development, Midnight, launched in March and 180 of the 238 apartments have already sold.
“APRA regulation requires at least 70 percent of units in a development to be sold before finance, so what we are seeing going up now is already taken up by the market,” Mr Georgalis said.
He said he didn’t believe public service decentralisation would have a long-term impact on Canberra’s housing market.
Mr Georgalis said an expected population increase in the ACT of 25,000 people over the next three years would add more pressure to supply.
“With growth increasing at least 50 percent per annum for the next three years our demand for property is also going to increase by that amount,” he said.
“As we have seen in Melbourne, within a six-month period the discussions have turned from an oversupply and property bubble to an undersupplied and rapidly-growing unit price and resulting issues with housing affordability.
“My forecast is Canberra will be in the same position by the end of the year.”
Mr Georgalis said Canberra’s tight rental market also offered an insight into Canberra’s shortage of stock. According to Domain Group data, Canberra house and unit vacancy rates (0.7 and 1.6 per cent) were among the highest in the country.
Rents are also rising faster in Canberra than any other capital city.
“A rental increase in the ACT really indicates that we need an increased supply of property to meet the investor market,” Mr Georgalis.
“At the moment I think the supply is just OK, but when it’s just OK it means in six months or a year’s time we’re going to get into a shortfall.”
Domain Group chief economist Andrew Wilson has also agreed demand is gaining pace.
“Supply always moves more slowly than demand,” Dr Wilson said.
“Canberra still has an undersupply of housing and I think we’ll start to see the unit market demand catch up with supply.”
