Millions of bedrooms lie empty as boomers refuse to move
MELBOURNE: About 13 million bedrooms lie empty each night in the residential property market, as older couples stay longer in big family homes due to a lack of reasonably priced downsizing options, politicians were told on Monday.
The lack of downsizers in the market was a big factor constraining the supply of housing, Barrenjoey banking analyst Jon Mott told a Senate committee examining ways to boost property development.
“We need to build more houses, we need to build more apartments, [and] the velocity of housing needs to improve so older Australians, who are now in the empty-nester stage, can move on and free up bedrooms to all Australians,” Mott told the committee.
The comments came after executives from major banks criticised housing supply policy bottlenecks, including excessive regulation of new developments and building costs.
If policy were to engineer a situation “where house prices were flat for 10 to 15 years in nominal terms, and fell in real terms – improving affordability – that would be a great outcome for all Australians”, Mott said.
However, in research published before his appearance, the analyst showed how challenging it will be to thread the supply needle, with changes to capital gains tax rates and negative gearing in the federal budget and Reserve Bank of Australia interest rate rises forcing mortgage demand to fall sharply.
Data from Loan Market Group, Australia’s largest mortgage aggregator, and published by Barrenjoey, showed home loan applications are down 23 per cent since their February peak as borrowers struggle to meet serviceability requirements.
“Combined with rapid house price appreciation over this period, especially outside Sydney and Melbourne, borrowing has become increasingly skewed to the rich,” Mott said.
Major banks told the committee, chaired by Liberal senator Andrew Bragg, that the housing market faced multiple risks.
ANZ group chief economist Richard Yetsenga said national house prices would continue to fall throughout next year, with “modest increases” expected in 2028, given rate rises and affordability constraints.
The challenge of boosting housing supply was complicated by planning bureaucracy and delays, elevated construction costs, the high price of land, labour shortages, infrastructure constraints, and tax settings, Yetsenga said.
National Australia Bank executive for home lending platforms Matt Dawson said more modular housing was one solution to boost stock, but building insurance and consumer protection frameworks were not keeping pace with the new construction method.
“Currently, state-based building insurance schemes don’t cover modular construction phase and delivery, and therefore, in the event of a manufacturer insolvency during that construction phase, consumers could lose that upfront payment and potentially go left with negative equity,” he said.
With major banks set to report their latest earnings in mid-August, Mott said lenders faced higher risk “from a trifecta of headwinds” including lower credit growth after the budget, intensifying competition putting pressure on margins, and concerns about deteriorating credit quality after a shock downgrade by Judo Bank last month.
“If sentiment does not settle and expectations of further house price corrections become embedded, bank share prices may come under further pressure,” he said. “It is the fear of bad debts and capital concerns that drive bank multiples.”
Goldman Sachs, meanwhile, told clients that the market should find a floor given supply constraints and policy settings.
“While we expect mortgage lending to slow, it is likely to find a new 5 per cent growth equilibrium, driven by a number of key structural forces,” Goldman analyst Brendan Sproules said.
“Existing investors, grandfathered under the old tax regime, are in our view likely to extend holding periods from eight to 12 years to preserve tax concessions, which could reduce transaction velocity and neutralise credit churn.”