IS THERE REALLY A HOUSING CRISIS?
Many are crying that the sky is falling in the real estate market and that crisis is inevitable. We ask the burning question is there a crisis?
Every year we seem to be running a housing deficit more houses consumed than built. With such a hunger for homes since the last bubble it makes sense that construction has slowed down significantly if not subdued. So why aren’t builders picking up the pace to cater for the market?
The reality is that there do not seem to be enough construction workers in the sector and bringing in workers from overseas can be costly.
FIRST TIME OWNERS BLUES
Many homeowners are feeling the pinch of going from their first home to the next home only because they cannot afford to trade up.
This is placing many mortgage lenders in a state of reluctance to give credit to those who simply don’t bring a good return.
Investors are looking for places to earn and whatever return they can get, and the low-end housing market has nearly ceased to exist as these investors buy up large intending to sell them on with a significant return.
Latest reports are showing investors who intend to flip homes accounted for the majority of homes sold in 2014. Most paid for with cash.
However, the biggest problem still seems to be the lack of supply and an affordability issue. Finding the right property and affordable price is discouraging many potential buyers.
The demand for buying is most certainly is still consistent, but housing prices and renting is rapidly outpacing wages affecting the health of the economy.
For those wanting to buy a home, the problem is saving for the down payment which can seem like an insurmountable task.
BUILDING TOO SLOW
Another issue is that the rate at which new homes built relative to the size of the population has reduced significantly.
The reason for this is because even though the number of homes consented per capita has risen, it is still considerably lower than what was achieved during the last building boom in many parts of the country.
There are also many other factors to be taken into consideration such as immigrants into the country and the demand placed on housing. Also many nationals are leaving to go overseas.
CHIEF ECONOMIST HAS SPOKEN
This has the chief economist foreboding a gloom future because house prices will continue to rise as the major cities housing shortage will get worse.
Houses have been increasing in price at a slower rate than previously noted. Some are attributing this to overseas buyers struggling to get funds. This also puts the large property investors in a position where they are investing elsewhere throughout the country where the market is more suitable for return on investment for them.
The effect this has on the local market is that it creates a small opportunity for buyers to be pickier about their purchases.
This likely would not last long because of the housing shortage continuing to get worse due to increasing migration are not enough homes getting built.
With interest rates still low, it means prices will eventually rise again. This creates higher density housing in some of the suburbs.
What we ultimately need is more builders and faster builds to keep up with the consents that are available.