Ray White Chief Economist
More houses are being demolished than ever before. In the 12 months to June 2022, there were more houses knocked down in Australia than ever recorded. While still only a fraction of the 10.9 million dwellings, the removal of 27,200 homes over the past year reflects the changing nature of our suburbs and a need for higher densities to house growth in population.
Every quarter, the Australian Bureau of Statistics (ABS) provides an estimate of the number of dwellings in Australia and provides detail on where homes have been removed and where they have been added. Not surprisingly, house and land developments around Australia provide the most new homes but increasingly, middle and urban areas are also seeing far more higher density development take place.
The ABS analysis of the number of properties being removed is interesting in that it highlights steady growth in knock downs, as well as the suburbs where the most homes are being removed.
The particularly high level of knockdowns over the past 12 months has in part been driven by HomeBuilder. Although the most obvious impact of this government incentive was a lot of new homes on the urban fringe, it was also available for people who wanted to build new homes or substantially renovate. It is likely that over the next 12 months, we will see a reduction in the total number – partly because HomeBuilder is no longer being provided, but also because construction cost increases are making it harder to build and rising interest rates are making it more expensive to borrow.
The suburbs where we have seen the most removals are dominated by places in Adelaide and Melbourne. It is a mix of mid-priced and expensive suburbs but overwhelmingly, the housing stock doesn’t always match the growing amenity or desirability of the suburb. Land values have increased a lot in these suburbs but the older style housing stock can often be poor quality. Alternatively, the suburbs may have seen significant changes to local planning regulations which allow higher densities, again making the value of land more valuable.
As an example, Heidelberg West in Melbourne’s north was previously dominated by lower cost government built housing. Over time, however, the suburb has become more desirable given its relatively close proximity to the Melbourne CBD, as well as public transport, retail precincts and schools. New single dwelling homes are being built, as are high densities.
The higher level of knockdowns in many suburbs is often good news for affordability if more homes are developed as a result, allowing more people to live in areas with high levels of amenity. If the homes are simply replaced, it can also improve the suburb if better homes are built.
More negatively, existing residents may not like the changing streetscapes as a result of new development. If higher densities are implemented, it can also result in parking challenges, greater pressure on existing schools and traffic congestion, particularly if higher densities are not matched by infrastructure investment.
Housing affordability continues to be a challenge across Australia, despite prices declining since the start of the year. Ensuring enough housing is built in areas where people want to live remains the key to this.