CLANCY YEATES August 29, 2012
If you keep an eye on the property market, you've probably heard about Australia's housing shortage.
What's received much less attention, however, is the recent news this undersupply isn't as acute as we were led to believe.
While house prices were surging for much of last decade, most property analysts and economists cited a simple reason for the stellar growth: demand for houses was outstripping their supply.
The latest government estimate, from June, was that there had been a cumulative shortage of about 228,000 homes since 2001. The finance and property industries relied on these projections for their own views, even if they also had more than a whiff of self-interest in forecasting price growth.
However, the latest census data has thrown a sizeable spanner in the works.
They suggest demand for homes may not be as strong as thought, because Australia has been growing slower than we'd been told.
How could this happen?
Put simply, the Bureau of Statistics overestimated Australia's population by about 300,000 people. It had previously thought there were 22.6 million people in mid-2011, but this estimate was cut to 22.3 million a few months ago.
It's not exactly clear why this happened. Possible reasons include errors in records about deaths and births, and misinterpretation of migration trends.
But the upshot is fairly clear. Most economists now accept that housing demand has not in fact been as strong as they thought - a fact that may help explain why house prices failed to bounce back as quickly as optimists expected. So what to make of the housing shortage claims now?
Even taking the lower figures into account, we probably still aren't building enough affordable homes to keep up with demand.
As the Reserve Bank has observed, we're building about the same amount of new housing as we were 10 years ago, even though there are 15 per cent more people today.
Forecasts aside, the saga highlights an important lesson for property buyers.
By all means take the forecasts for housing supply and demand into account, but always treat industry predictions of higher house prices with plenty of scepticism.