A query about the “dwelling construction” statistics… do these show the gross addition to the dwelling stock, or the net addition after subtracting demolitions?

My suspicion is that it’s the latter. I had a quick look at ABS8752.0 which is titled “construction activity”, and I couldn’t find anything about demolition, so I’m guessing your “new dwelling” statistics are not an exact measure of growth in the housing stock, since there will be some demolition activity simultaneously reducing the stock.

Is this likely to have much of an impact on trends you highlighted in your graph? Or is it the case that demolition activity is negligible…?

I couldn’t find any stats on the ABS site about either the total number of dwellings, or about the number of demolitions, to verify…

Thanks.

The reason housing is unaffordable and new building work has slowed down is essentially twofold: liberalised credit from the banks globally, finally culminating in the GFC, has caused people to bid up housing prices exorbitantly — it’s basically land value speculation, nothing to do with the cost of construction or the historical value of housing or even longterm ability to retire the debt. Inheritances are keeping the Ponzi scheme going a bit longer, then after that wages and salaries of the next generation simply aren’t going to cover the asking prices. The second reason is that neoliberal state governments, utilities and councils have taken the opportunity over the last decade of increasingly shifting new infrastructure costs directly to developers and therefore home buyers in new subdivisions, costs once borne by the entire community through taxation.

For accurate and comprehensive analysis of Australian housing news and all related national and international feeders into house prices, visit Global House Price Crash, Australian forum.

As we all know, the MARGINAL occupation rate of a house is well below the average of 2.54.

That is, the new houses being built are not aiming at the average number of people, but at a lower number bought about by changes in the demographics - more single occupancies etc. At least that’s my view, and probably the view of the developers who either respond to what the current (not the average) market wants, or sink.

The gradual reduction in number of persons per house is somewhat masked by the large existing pool of houses - it takes a lot to change the average.

As for the economic benefits of upward trending far beyond inflation, see this abstract Future generations will pay the price

I doubt many banks would be interested in funding such a model right now. Maybe a few years ago when the lenders were all in the same mind.

I think the most valid point you make is the reduction in turnover. If prices start to slide people will simply take their houses off the market and hold them (unless they are facing financial ruin). They will simply stop the turnover and halt the fall in prices. Not good news for the real estate agents and conveyancors but this will provide some support and stability.

“That factor is gearing: the level of debt taken on by Australians to finance house purchases, and the ratio of borrowed money to house purchase prices. Rising leverage drove prices up in a Ponzi bubble, and falling leverage will drive them down again too. “

At the extreme of this, see the investment models pushed hard by property gurus like Ed Chan and Tony Melvin (described in their book “How to Legally Reduce Your Tax Without Losing Your Money”). Basically you get a second mortgage against the increased value of the ones you already own. You increase your property portfolio exponentially over time. You never sell a property. Since you’re negative gearing, you get to a point where the cost-yield gap is too much for your income to cover, so you just get another low-doc loan to cover your other loans. You get more low-doc loans to fund your lifestyle. You retire and buy a yacht or whatever using low-doc loans. This has become a very popular investment model. And it results in a reduced pool of properties ever being released back onto the market.

It’s that reduction of the turnover pool, not the reduction of total dwelling numbers, that brings about the undersupply. (Why else did Melvin and Chan write the book?). An increase in total dwellings could offset it, but governments ensure that doesn’t happen.