Global law firm Herbert Smith Freehills has released insights from its ‘Real Estate Sector Insights Asia Pacific – Q4 2024’ report, highlighting that Australia’s living sector continues to be challenged with an affordability and supply crisis.
The key challenges include economic pressures, high construction costs, lack of government support for housing supply and record high migration levels.
Herbert Smith Freehills believes that Australia is unlikely to meet its ambitious target of building 1.2 million new homes by 2029. Completions for 2024 are projected at 176,000 – far below the 240,000 annual benchmark.
A CBRE report reveals that projected apartment completions have dropped by 20% over the past year, with over 34,000 approved homes stuck in ‘development limbo’.
High land prices, costly construction and financing delays remain key barriers, according to Herbert Smith Freehills.
Another issue is the high tax rate applied to foreign investment schemes, which contribute a large part of the development capital driving the Build to Rent sector.
Sydney’s housing market is facing its first downturn in 21 months, with house prices dropping in 40% of suburbs.
This fivefold increase from a year ago reflects a growing affordability crisis, as rising stock levels and reduced borrowing power weigh heavily on buyers.
In October, Sydney’s housing values dipped by 0.1%, driven by elevated borrowing costs, worsening affordability and above-average listings. CoreLogic data confirms that this marks the first fall in values since January 2023.
Currently, Scape Australia is planning one of the country’s biggest Build to Rent developments yet – the $1.5bn The Timberyards development in Marrickville, Sydney’s Inner West.
The scheme will deliver up to 1,000 apartments including 100 affordable units when complete. Already fully funded, work can begin as soon as planning approval is granted. Herbert Smith Freehills advised on The Timberyards development.
Herbert Smith Freehills found that Western Australia saw residential building costs spike 20.3% over the year to September. These costs, growing four times faster than the national average, could signal inflationary pressures spreading nationwide.
According to the ABS, the amount people in WA pay their builder for a newly completed house, excluding land, jumped 4.1% in Q3 2024 alone.
Industry experts such as Lendlease’s CEO Tony Lombardo and Stockland’s Tarun Gupta have highlighted labour shortages and rising wages as major hurdles to increasing housing supply.
At a recent roundtable hosted by the Business Council of Australia, they stated that the Government should significantly increase the share of immigrants who are construction workers.
