It boils down to "how can things get any worse" than they were in 2024? That's no given.
Anticipated interest rate drops will help established house prices, but a 1% fall won't bridge the growing #feasibility gap for new development.
Structural changes are needed for things to improve and I'm yet to see anything material. Instead State and Local govt continue to add cost and requirements.
So here are my 2025 #predictions based on current settings/announcements. Change can occur as the economy and housing politics continue to deteriorate.
1️⃣VIC approvals ⬆️ but starts and completions ⬇️
VIC will beat 2024 low approvals but is yet to hit the bottom in starts and completions. We are now reaching the end of building homes sold in 2022 peak. Since then established house prices have dropped as costs skyrocketed.
Developers will seek approvals for a future when (if) things improve but #feasibility will prevent most projects from starting.
Nothing in #housingannouncementweek helps, especially if established house prices remain flat as predicted (I agree).
Think sub 50k commencements and completions for the year.
2️⃣NSW approvals and starts ⬆️
NSW still has structural #feasibility issues – worse than VIC/QLD. But it has two things that will lift it from the bottom: • super low delivery in the last 2 years • high established prices
The new Housing Delivery Authority should improve approval numbers and times, but it won't fix feasibility, especially for apartments.
3️⃣QLD flat or slightly ⬇️
QLD is at an affordability ceiling which will limit volumes. It still struggles with a lack of developable land supply and high-rise builders. This impacts costs and #feasibility across all projects, but mostly in higher-density which will remain mostly higher-end.
The new State Government will struggle to reverse this given the public infrastructure investment already baked in.
4️⃣Overall housing completions to drop further
In what will be no suprise to anyone but politicians full of wishful-thinking, new supply will continue to fall well-short of the 240k p.a.
#housingaccord target. The final 2024 figure isn't yet known – expect ~167k – and 2025 is shaping up worse due to low numbers in VIC and QLD.
Delayed rollout of HAFF funding will see projects delayed or shelved, making things even worse.
5️⃣BTR to remain low volume
New #BTR project starts will remain low given ongoing feasibility challenges. Anecdotally, newly completed BTR #developments are taking longer than anticipated to rent which would (should) leave operators circumspect about future supply unless there is a strong point of difference in the market.
It will not help with #housingaffordability or supply at scale short term.
🍾Bonus: Federal Election
Election to be called for May and the Coalition to win minority government. It's the economy, stupid.
🤔Any counter views?