Glens into the Future: Sydney’s Construction Shortfall.
As an avid observer of Sydney's evolving landscape, the federal government's ambitious plan to construct 1.2 million homes in the next five years both excites and concerns us. This goal, set to begin in just a few months, aims to address Australia's urgent need for housing. However, recent data from the Australian Bureau of Statistics (ABS) reveals a troubling trend: housing approvals are on the decline.
Source: ABS
In January, housing approvals dropped by 1%, reaching a seasonally adjusted figure of 12,850. This decrease follows a sharper 9.5% fall in December, marking the lowest approval levels since May 2012. To meet the government's targets, we need to build 20,000 homes each month from July this year to June 2029. Given the current trajectory, achieving this target seems daunting.
Experts point to several factors contributing to this slowdown. High interest rates, supply chain issues, and a shortage of skilled workers have driven up material and labor costs, making new projects financially risky. Professor Nicole Gurran from the University of Sydney explains that these challenges have deterred developers from pushing forward with new approvals, despite a backlog of approved projects that remain incomplete.
Additionally, zoning and planning issues at the state and local levels further complicate the situation. Denita Wawn, CEO of Master Builders Australia, highlights cases where infrastructure costs have hindered development, such as in Hobart, where the cost of upgrading a substation deterred a developer from building more homes.
The irony of the situation is that to meet housing targets and make homes more affordable, property prices must remain high enough to attract private developers. This creates a cycle where high property prices are necessary to spur construction, yet they also contribute to the affordability crisis.
Source: 7 News Australia
The federal government has allocated $3.5 billion to states and territories to help meet these housing targets, but some experts argue that more direct intervention is needed. Gurran advocates for the government to underwrite housing projects, particularly in unfavorable market conditions, to ensure that lower and moderate-income earners can afford to buy and rent homes.
The Greens have proposed a policy for a public developer to build 360,000 homes in five years, reflecting a growing call for increased government involvement in housing. While Master Builders Australia favors a market-driven approach, there is consensus that government intervention is necessary where there is no viable return for private investors.
As we move forward, the question remains: can Australia achieve its ambitious housing targets? With the right strategies and cooperation between government, developers, and the community, it is possible. However, significant challenges must be addressed to ensure that Sydney and the rest of the country can meet the housing needs of its growing population.
Reflecting on this situation, we remain cautiously optimistic. It will require innovative solutions and bold actions to overcome the current obstacles, but with a collaborative effort, we can work towards a more sustainable and equitable housing future for Sydney and beyond.
Source: D. Jeffrey, Sydney’s Residential Housing Plan.
