NSW Fast-track Housing Supply will need to be a priority in 2024

NSW Housing Supply vs Demand

The housing supply gap in Greater Sydney is a pressing issue with serious implications.

The delivery of housing in Greater Sydney reached its peak in the years 2017-18 and 2018-19. However, since then, there has been a decline in supply.

With the population of Sydney estimated to reach over 6 million by 2032-33, the need for new homes will only continue to increase. According to government modelling, approximately 30,000 to 40,000 new homes will need to be built annually over the next five years to meet the demands of Sydney’s growing population. It is estimated that Greater Sydney alone will require more than 1 million additional homes by the year 2041.

The NSW Government has set ambitious targets ranging from 16,500 to 18,500 new homes in various LGAs in Greater Sydney, in order to cater to the increasing demand. While these targets look promising, there is a real concern that they may not be met due to a range of factors such as limited funding, complex planning regulations, and bureaucratic red tape.

Investors and developers have an opportunity to step in and address the gap in housing supply. The current market climate, low interest rates, and government incentives for first home buyers have made it an attractive time to invest in the property market.

Why is housing supply not meeting demand?

One significant factor contributing to the undersupply of housing in Sydney is the influx of migration. Sydney, being a global city, attracts a large number of migrants each year, which increases the demand for housing. Secondly, the pace of new developments has been slow, affected by planning and zoning restrictions. These regulations often delay the approval process for new developments causing a lag in the supply of new housing.

In addition, the construction industry, which plays a pivotal role in housing supply, has been facing challenges such as rising costs of raw materials and labour shortages. These factors have slowed down the construction and completion of housing projects.

Government policies and initiatives

The NSW Labor Government is taking steps to tackle the housing crisis in the state by prioritising the construction of additional social and affordable homes through the NSW Land and Housing Corporation (LAHC) and the Aboriginal Housing Office (AHO). This includes an expanded State Significant Development (SSD) approval pathway for projects consisting of 75 or more homes, or with a capital investment exceeding $30 million.

Government aid and policies play a crucial role in addressing the housing supply gap. Various government schemes, such as the First Home Buyers Assistance Scheme (FHBAS), are designed to support new buyers entering the market. Under the FHBAS, first home buyers in NSW get a transfer duty exemption or reduced rate when purchasing an existing or new home, or vacant land (up to $1 million value).

These incentives not only aid individual home buyers but also stimulate the overall housing market by increasing demand and ultimately encouraging capital growth. Aspiring property investors should view government first home buyer schemes as a means of getting started on their property journey so as to gradually build a successful investment portfolio over time.

What next?

One potential solution to the critical undersupply of housing in Sydney is increasing collaboration between private developers and community housing providers, as seen in initiatives such as the Build-to-Rent scheme which aims to increase the supply of affordable rental properties. The ‘build to rent’ model aims to increase the supply of rental housing by improving investment options for property investors. Not only does this model result in the delivery of high-quality rental properties that are well-managed and cater to the needs of tenants, but it also presents opportunities for investors to diversify their portfolios and contribute to solving the housing crisis in Sydney.

The critical undersupply of housing in Sydney is an urgent issue that demands immediate action. Whether it is through government initiatives to support first home buyers or innovative collaborations between private developers and community housing providers, it is evident that a multi-faceted approach is necessary.

Addressing the housing supply issue should be the top priority for Sydney in 2024. Without a sufficient increase in affordable, quality homes, the city risks exacerbating social inequities and limiting the potential for economic growth. Property investors have an important role to play in this issue, and by supporting initiatives such as the ‘build to rent’ scheme, they can contribute to working towards a solution. Investing in properties that are close to public transportation, employment opportunities, and essential amenities will not only lift the burden on Sydney’s housing market but also help investors reap the benefits of long-term, sustainable rental income.

Summary

The housing crisis in Greater Sydney is a pressing issue that demands immediate attention in 2024. The supply of housing is falling significantly short of the growing demand, and the government’s current measures may not be sufficient to address the problem.

For investors and homebuyers, the current housing supply-demand dynamics present exciting prospects. Despite the challenges, this environment offers opportunities for investors to contribute to addressing the housing crisis and build sustainable investment portfolios. With government support and incentives like the ‘Build-to-Rent’ scheme and the First Home Buyers Assistance Scheme, prospective homebuyers have the opportunity to enter the market and acquire properties that foster long-term wealth creation. By holding onto properties over the long term and investing in locations with high potential for rental income, investors can support the development of affordable housing while also achieving financial success.