Market Comment – Monday January 18th 2010

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We have all read or heard about the property shortage. But the average people, including most media commentators believe that the issue is that not as many people want to sell their properties. This is only partially accurate. The true reason for the stock shortage is the fact we are not building enough dwellings.

Looking at the stats:
The Australian Bureau of Statistics (ABS), in their census in August 2006, showed that in Victoria there was an average of 2.6 people per dwelling. The ABS also showed that the population of Victoria was 4,932,422. This would mean we would need about 1,897,085 dwellings. There were 1,869,384. This was a shortage of 27,701 dwellings.
We can then look at the quarterly changes to June 2009 since the Census and see that on average there were 7659 building approvals and the population increased just over 25000 per quarter. If we add up the actual changes it equates to a population of 5,233,563 and assuming all approvals were complete then we would have 1,963,823 dwellings. For the population estimate we would need about 2,012,909 and this is approximately 52,804 dwellings short.

AND IT IS GETTING WORSE.

Even if we began building at double the current rate it would take at least 5 years to reach a break even point. And this is assuming population growth does not continue to increase. And this is incredibly unlikely as we do not have the available tradesmen to fulfil this.

If we add this to unprecedented low unemployment rates, meaning we really need to increase immigration, it means we can assume property prices in Victoria will sky rocket over at least the next 5 years. And interest rate hikes will have only a very small effect!

Everyone has to live somewhere! The shortage of property will affect every type and style of property on the market today. Everyone will be pushed to find a few extra dollars because of the perpetual competition on each and every property on the market.

If you are considering buying a property soon, you must seek assistance. Think about a buyer advocate. We can assist you with property selection, price and negotiation skills that have taken years to learn. Call and make an appointment to see one of our fully trained and qualified advocates. There is no charge for the first meeting nor is there any obligation to continue.

All statistics are from the Australian Bureau of Statistics

Ian James

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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.

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