The drivers of supply and demand in Australia's rural and regional centres

Andrew Beer, Selina Tually, Steven Rowley, Fiona Haslam McKenzie, Julia Schlapp, Christina Birdsall Jones, Vanessa Corunna

Research output: Book/ReportCommissioned reportpeer-review

1 Citation (Scopus)

Abstract

Background: This study addresses the question posed in the 2009 AHURI Research Agenda: how do the drivers of supply and demand for housing in regional and rural centres affect the supply of affordable housing? This is a particularly important area of investigation at the current time, as there is a dearth of literature and data analysis tracing changes in, and the challenges facing, Australia's regional housing markets. Throughout this report, the focus of analysis is directed to centres that are not part of the functional labour markets of the capital cities (Baum & Mitchell 2010) and this is consistent with earlier research on rural and regional housing markets (see, for example, Rowley & Haslam McKenzie 2009; Rowley 2008; Wulff et al. 2007; Hillier et al. 2002; Beer, Bolam & Maude 1994). In practical terms, this rules out a limited number of substantial communities-including Geelong, Newcastle, Wollongong and the Gold Coast. It is also important to acknowledge that regional housing markets have been affected by the same house price boom and subsequent affordability pressures that have influenced urban housing markets in addition to other contextual conditions that influence local housing markets. The fact is that, to date, analysis of Australia's housing markets has largely focused on metropolitan (capital city) markets, to the detriment of understanding the impact of affordability and housing supply and demand in regional markets, as well as consideration of the impact of new housing policy programs and mechanisms on conditions in these markets. Specifically, this project answers four key research questions: 1. What are the significant housing market drivers in rural and regional centres throughout Australia and how do they vary by state, region and local economy? 2. What is the nature and extent of housing affordability problems in rural and regional centres and how do they vary by geographic setting (remote, coastal etc), local economy and population size? 3. How have these housing market drivers affected the supply of affordable housing in both the rental and home purchase sectors? 4. What is the likely impact of the measures being used by local, state and Australian governments to boost the supply of affordable housing in these centres, and how can these initiatives be strengthened? The project builds upon previous AHURI research investigating trends and patterns in non-metropolitan housing markets in Australia (Wulff et al. 2007, 2005); issues in private rental housing in non-metropolitan areas (Beer 2004, 1998; Hassell 2002); and, more recently, on affordable housing solutions, spurred on by the housing affordability crisis across the country generally (see Milligan et al. 2004; and updated in 2009). It fills a significant gap in terms of examining and understanding the changes in regional housing markets since the 1991-2001 Census data analysis conducted by Wulff et al. (2007, 2005); covering a decade that saw a rapid house price boom, continued economic restructuring and diversification in regional Australia, and major changes in both government policies and global and regional economic development. In many rural and regional centres the pace of change within their housing markets has been substantial. Much of rural and regional Australia has been affected by the rapid house price inflation evident across Australia since the year 2000. Many regions have been affected by the 'resources boom' which has placed increased strain on many housing markets and resulted in bifurcated housing markets: one segment of the market is focused on high income, often temporary, mine workers; while the established population working in ancillary industries or not working at all are forced to compete for less expensive properties at the bottom end of the housing market. Notably, key data sources such as the Australian Bureau of Statistics (ABS) do not properly reflect housing demand in some localities because they do not have the facility to account for transient or mobile workforces such as fly-in/fly-out workers in the resources sector, and the timeliness of the release of data on trends in regional housing markets is a further concern. It is also difficult to know what proportion of housing supply is sopped up by home owners who live in multiple houses at different times during the year. The report also highlights the significant gap between the home ownership sector and rental accommodation. In large measure, home ownership has remained affordable in rural and regional Australia-particularly for those households already in home ownership. There is a relatively low level of housing stress among such home owners and some centres remain affordable both in absolute terms and relative to the capitals. However, there is clear evidence of market failure in the rental market and widespread concern among a broad range of stakeholders about the ability of low income earners to access affordable rental housing and transition from rental into home ownership in the short and longer term. There is also some evidence that indicates that measures of housing stress do not adequately capture current conditions within the housing market, especially the difficulties that many first home buyers now face in purchasing their first home. A significant number of people are now excluded from home purchase by the lending requirements imposed by banks, including the need for substantial deposits and secure incomes. These two requirements, in combination with relatively higher prices, are a significant impediment to entry into owner occupation and result in some households being trapped in private rental housing. Critically, social housing provision is inadequate, while the private rental market appears undeveloped or under-developed; partly because of a shortage of investors, partly because of inappropriate planning regulations and, in some measure, as a consequence of the low wage, high variability labour markets in these regions. The incidence of housing stress among tenants in rural and regional centres is acute as in the major metropolitan centres. The key steps that governments need to take to enhance the effectiveness of their housing programs include: As an initial step, governments must recognise that housing affordability is a major challenge for particular groups in rural and regional Australia. The geography of housing affordability and unaffordability is highly variable and this must be taken into account in policy responses for addressing affordability problems across the country. Clearly, more overt attention is needed to address the set of questions posed by this report and key points raised in this research. The earlier work by Wulff et al. (2007) is a welcome entry into this field. Collecting timely statistics on housing need (including supply and demand) and housing conditions generally in rural and regional areas. This must be undertaken as a priority to aid in broadening our understanding of such markets to assist with planning for future population and economic growth across Australia, as well as for understanding and ultimately overcoming capacity constraints. Better promotion and targeting of initiatives to rural and regional centres. Many local government officers we interviewed were not aware of either the HAF or the NRAS. This is a significant gap. We note that there is no forum, nationally or a state/territory or more regional basis, for disseminating information on housing programs to rural and regional communities. In addition, the processes for applying to such schemes need to be geared to rural and regional centres that often have smaller budgets, limited capacity to complete lengthy application processes, and restricted scope to work with multiple partners and the high turnover of staff in many places. Targeting some programs to rural and regional centres is an obvious step in meeting the needs of non-metropolitan residents. Such programs need to be focused on developing effectively functioning housing markets in the first instance and then latterly on further developing the rental market.Increasing the supply of housing for Indigenous Australians by maintaining a commitment to the long-term supply of appropriate housing (addressing the prominent issue of overcrowding) and the maintenance of such housing. Matching the provision of infrastructure in rural and regional centres to the supply of additional land for housing. Appropriate infrastructure will both result in greater growth opportunities and ensure higher rates of labour force participation-including among women with care responsibilities-thereby raising household incomes and addressing the issue of housing stress. Making the provision of affordable housing a priority in the development of planning schedules. Often state legislation prioritises other factors-including the preservation of agricultural land for environmental concerns. While these issues should not be ignored, housing affordability needs to also be considered. Planning issues-infrastructure costs and charges make it difficult for developers to deliver an affordable product. Traditional regional lot sizes of over 600 square metres still prevail, again limiting the scope for the delivery of affordable land. Capacity constraints within regional planning authorities make it very difficult to respond quickly to rapid changes in market demand.

Original languageEnglish
Place of PublicationMelbourne
PublisherAHURI
Number of pages126
ISBN (Electronic)978-1-921610-66-0
Publication statusPublished - Mar 2011
Externally publishedYes

Publication series

NameAHURI Final Report
PublisherAustralian Housing and Urban Research Institute
No.165
ISSN (Print)1834-7223

Keywords

  • Australia
  • Centre
  • Demand
  • Driver
  • Regional
  • Rural
  • Supply

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