Australia could have a shortage of flats – what can home loan borrowers do?

Spring property has kicked off with a bang. PropTrack says August saw an impressive +20.5% monthly bounce in listings across Australian housing markets. Home buyers might feel spoiled for choice now, but beware: there may be a pinch ahead. Australia could be facing a unit shortage.

The Australian Bureau of Statistics reports that construction and dwelling approvals have slowed significantly across capital cities, clocking in -39.8% below the decade average.

The National Housing Finance and Investment Corporation says this lag in new units could result in a housing shortfall of 175,000 by 2027 – with units making up over half (59%) of the deficit

Units have long been a sensible alternative to the steep costs of buying a home. A flat can be a good compromise between value, space, and lifestyle considerations for investors, first home buyers, and downsizers alike, especially now that Aussies need six-figure savings to afford a 20% home loan deposit.

However, less housing stock could squeeze the already tight rental market and further lock future home buyers out of property, since high demand combined with limited supply is a classic economics nightmare. 

The cash rate will potentially ease in 2024, too, which could decrease home loan interest rates and fuel a stronger unit price boom. 

So what options do Aussies have?

Spring property’s main ethos is to make hay while the sun shines. According to CoreLogic, September listings are up, but clearance rates aren’t. This means there’s greater supply and less demand at the moment. If you have your eye on a unit for your future home, now could be the time to buy.

Domain also points out that there are over 100 suburbs with houses and units under $500,000 across Australia’s capitals. Two eligible people using the First Home Guarantee Scheme (FHGS) scheme could buy a home at this price point by chipping in just $12.5k each. 

Units are the kind of property most likely to come at that price, making them a budget-friendly option for those keen to narrow down their suburb search. The FHGS now lets any two people buy, including siblings, parents and children, and good mates, expanding the market potential of affordable units beyond investors and dual-income couples. 

Additionally, the scheme only requires a 5% home loan deposit upfront – widening the door for those locked out of housing. Buying even a cheap flat will still require careful financial planning and home loan comparison, but sooner may be better than later for those who can afford it. 

Compare low interest rate home loans in the table below.