Housing Supply Truths

In the early nineties when thin-rimmed glasses were making a comeback, property tycoon Harry Triguboff was making some eye-popping purchases.

The founder of Meriton apartments began purchasing rundown petrol stations and industrial wasteland next to noisy motorways.

His magnate mates thought he’d lost his marbles, but Triguboff saw something.

The real estate billionaire who started out as a taxi driver identified a massive cohort of would be home owners who didn’t want water views or grass beneath their feet.

They were first home buyers who wanted cheap, affordable housing regardless of the surroundings as long as they had access to public transport and basic amenities.

Put simply, they just wanted a ‘box’ to live in and pay rent to the bank.

Triguboff’s read of the market was bang on and for the next three decades he continued building vertical villages all over Australia. Hence his nickname, ‘High-rise Harry’.

In recent months the government has been at pains to highlight our housing supply problem.

The truth is, Australia’s had a housing supply issue for decades. Every property developer and local council knows this. It’s nothing new.

However, supply problems don’t exist without pent-up demand.

And it’s the demand side of the equation which the government refuses to acknowledge.

Specifically, immigration.

The problem is no one dare mentions immigration for fear of being labelled a racist or a xenophobe.

So I’m going to say it, immigration is a massive contributor to our housing crisis and if it was managed more carefully it would certainly make a difference.

Here’s one example…

The property market in China has collapsed and despite all attempts by the Chinese government to stimulate it, they can’t.

Consequently, a great wall of Chinese investors now see the Australian property market as a safe haven to park their money.

And park it they have!

Have a look at these numbers…

Right now Chinese investors are buying (on average) $8,000,000 worth of residential property in Australia…per day!

Therefore, if the median unit price in Australia is currently $692,862, that means 11.54 units per day, 4,214 units per year or 21,072 units over the next five years will be bought by Chinese investors and many remain unoccupied.

But don’t get cranky with the Chinese, we allow it.

And to add insult to injury, we don’t even have a bilateral agreement in place. Meaning, we’re not allowed to purchase property in China yet there’s no limit to what they can buy here.

But to be fair to the current government, they didn’t put this arrangement in place. However, if they were fair dinkum about addressing the housing shortage they could certainly change it.

Because here’s the rub…

The federal government’s Housing Australia Future Fund was designed to finance the construction of 30,000 new social and affordable dwellings over the next five years.

And during that same period, the government will allow 21,000 units to be bought by Chinese investors (all things remaining equal).

Australia’s housing crisis is less about our thirty-year-old supply-side issue, and more about our recently developed demand-side issue.

It just takes an honest set of untinted eyes in Canberra to acknowledge it.

Have a great weekend!

Adam

p.s. for the rest of this year I will only be doing one Moowsletter per month.