Housing: Affordability

Plan for Victoria Submission

Posted on by Angie Zigomanis

Quantify Strategic Insights and Oliver Hume, recently joined forces to prepare a submission to the Victorian Government’s ‘Plan for Victoria’.  

Download report here: Plan for Victoria Submission

Combining a wealth of experience and deep expertise in greenfield markets, population and demographic analysis, urban development, property research and strategic planning, the submission underscores the urgency of ensuring an adequate, ongoing supply of greenfield land to meet the escalating demand for affordable housing, driven by population growth and shifting demographic trends.

Melbourne’s housing market is at a crossroads. With the city’s population projected to expand significantly in the coming years—largely fuelled by overseas migration—the demand for new dwellings, particularly family-oriented housing, is set to soar. However, the current constraints to delivering greenfield land supply pose a significant threat to Melbourne’s ability to accommodate this demand.

Without sufficient greenfield land, Melbourne risks replicating the challenges faced by Greater Sydney, where limited land supply has led to skyrocketing house prices, reduced affordability, and a shortage of new homes. The Victorian Government must take proactive steps to ensure that Melbourne does not follow this path.

 

Household sizes on the rise as affordability challenges bite

Posted on by Angie Zigomanis

Understanding trends in household formation is important to understanding how population growth translates to housing occupancy and new dwelling demand.

The COVID-lockdown period and immediate aftermath saw big changes in living situations in Victoria that are now steadily unwinding.

  • Growth in the population living in group households, as related individuals (typically siblings), and as non-dependent children (adult children in the family home) began at the end of lockdowns in 2021 but has accelerated over the past 18 months or so.
  • Meanwhile, the growth in lone person households that began during the pandemic lockdowns appears to have plateaued since the end of 2022.
  • Population in couple without children households also showed a similar rising trend, but is decreasing in 2024 – potentially reflecting the increase in adult children in the family home.

The fall in average household sizes that occurred through the COVID pandemic is now reversing. Quantify Strategic Insights estimates the net effect is that annual household formation in Victoria has reduced by around one third, from a peak of just over 90,000 additional households in the year to April 2023, to around 60,000 in the year to June 2024. This compares with the 55,000 or so dwellings completed in Victoria in FY2024.

The market is doing what markets do. Rising rents and prices due to the imbalance between demand and supply is rationing demand. Any immediate uptick in supply is unlikely, while the jury is also out on the rate at which population growth will slow and reduce demand. ‘Economics 101’, therefore, suggests that household formation will be further constrained, with rents only stabilising when they reach a ‘market clearing’ level that balances demand and supply. The question is how much further household structure in Victoria will change before rents stabilise?

From a policy perspective, the key challenge is to balance flexibility with foresight in responding to both market-driven changes in household behaviour and long-term population growth. As a starting point, monitoring trends in household composition is vital if policy is to enable delivery of the number, and type of housing required, and to ensure that changes in household formation are accounted for.

For more analysis on trends in demographic change and impacts on the housing market, contact Rob Burgess or Angie Zigomanis.