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

High rises of units for rent

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?

Affordable suburbs make prime spring property targets for unit buyers

New apartment buildings

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.

Compare low rate home loans - last updated 1 March 2024

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    Home Variable Rate

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
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    5.95% p.a.

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  • Neat Home Loan

    Owner Occupier, Principal & Interest, LVR <60%

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.11% p.a.

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    Package, Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.15% p.a. variable
    6.40% p.a.

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

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    Home Fixed Rate

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.80% p.a.
    fixed 3 years
    5.91% p.a.

    Enjoy the security of a competitive fixed interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply). Mozo Experts Choice award winner.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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