Step 2 - Understanding the Housing Market

Housing market analyses

Go to the bottom of this page for a list of local housing market analyses. These are generated, on request, by Housing NSW.

Analysing and estimating trends

Once you have identified any partners (such as other LGAs or community participants), conducted your policy and literature review, and fixed your market analysis objectives, you are ready to move to the next stage of analysing the market.  This section provides a detailed description of how a range of data can be examined so a picture of your local housing market can be captured.

Tools for researching, planning and analysing

In many cases you are looking for trends in demographic and other data, and therefore a particularly useful set of data is the Time Series Profile from the Australian Bureau of Statistics. This data series adjusts data as a result of boundary changes and notes any changes to definitions of key census variables.

Demographic trends

Population and household structures influence the profile of housing need and demand. It is important to consider the size, age, gender and ethnic structure of the population, as well as the type of household.

Trends in overall population size provide an important backdrop for the demographic factors influencing the market. A key trend in recent times has been toward smaller household sizes as a result of people’s preference for living on their own, increased life expectancies, and a decline in fertility rates. This means the demand for housing can be increasing, even when there is no population growth in an area.

The official ABS estimate of the population in the LGA is the estimated resident population (ERP). Estimates for periods after 30 June 2001 will be revised as the 2006 census results become available.

In non-metropolitan LGAs with large Indigenous populations, it is important to examine the relevant profile that provides detailed census characteristics of Indigenous people, families and dwellings. These profiles are available for a range of geographical levels including:

• Indigenous Areas (which are discrete Indigenous communities);
• Remoteness Areas;
• Local Government Areas (LGA).

Details are available on the Australian Bureau of Statistics (ABS) website.

There are number of specific issues to be noted when using census data on Indigenous communities. For example, if you are using a 1991 to 2001 time series, it is important to note that between the 1991 and 1996 census the count of Aboriginal and Torres Strait Islander people increased by some 33 per cent, a far greater increase than can be explained by demographic factors (births, deaths and migration) alone. The issue of Indigenous census data is the subject of an occasional paper by the ABS.

Household formation

A key concept in the analysis of demographic influence on housing demand is the notion of household formation, or the likelihood of different sub-groups of the population forming separate households. In recent times, the number of sub-groups forming separate households has been increasing, a consistent trend across Australia and indeed many parts of the Western world. These trends are likely to continue. The figure below shows the number of Australian households in 2001 and the forecast number in 2026. It shows forecasts for two ABS scenarios: Series I and Series III. The increases in ‘couple with no children’ and ‘lone-person households’ show a clear trend. The increase in the number of one and two-person households will continue the downward pressure on the occupancy rate for households.

Another way of looking at this issue of household formation is to measure occupancy rate of households, that is, the average number of occupants per occupied private dwelling. The table below shows the occupancy rates for NSW Statistical Divisions between 1991 and 2006.

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Average household size: NSW 1991–2006

The table shows declining occupancy rates in all Statistical Divisions and for NSW as a whole. This decline can be attributed to a number of factors including:

• declining fertility levels
• ageing of the population
• increasing proportions of single parent households
• preferences for living in smaller households
• higher incidence of divorce.

The ABS (2004) projects that this decline in the average size of households will continue in NSW, from 2.6 persons per household in 2001 to between 2.3 and 2.4 persons per household in 2026.  This means that there will be a steady demand for dwellings (as the number of households grows) even in areas where there will be no population growth. Between 2001 and 2006 the number of households in NSW will grow by 33–38 per cent, while population will only grow by 20 per cent.

Age structure

The age structure of the population influences migration trends, household formation and housing need. There are important age ‘cohort’ effects in relation to tenure preference and housing demand as well as vulnerability and the likelihood of housing need. For example, a large aged cohort may suggest a high need for adaptable and accessible housing, or a large young population coupled with low employment opportunities may imply a vulnerable group of people who may require rent assistance Therefore, your analysis should examine the proportion of the population in different age cohorts, to identify which household types in each tenure have grown or declined.

It is convenient to break the age structure into four groups:
 

1. 15–24 years or young households, characterised by shared rental tenure. Many people in this age group will be quite mobile while seeking education and career opportunities, which can result in higher concentrations of this age group in areas where education facilities are present;
    
2. 25–44 years or middle households with children, who are often purchasing homes and generally have the largest average household size;
    
3. 45–64 years or mature families, where average household is reduced as children leave home and the majority of households are owners or purchasers;
    
4. 65+ years or late households, which usually only have one or two persons and a high degree of outright home ownership.

The key demographic data sources are the Census and the annual ABS estimate of the resident population.

A good way to develop a picture of your LGA’s demographic structure is to produce population pyramids for each census period. A population pyramid is two back-to-back bar graphs, one showing the number of males and one showing females in a particular population in five-year age groups. Males are conventionally shown on the left and females on the right, and they may be measured by raw number or as a percentage of the total population. The top of the pyramid corresponds to the oldest members of a population while the bottom represents the youngest age group. A template that will assist you in preparing a population pyramid for your LGA is included in the Housing Kit Database. Another useful demographic concept is the level of net migration between census periods.  Net migration measures the change in the population of an area between census periods after allowing for natural increase (that is, births minus deaths). This number is a better indicator of the demographic ‘health’ of an area than raw population change figures. A decline in population might, for example, reflect economic decline in an area.

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Special needs groups

It is useful to distinguish those groups in the population who have special needs that must be addressed to house them appropriately. Examples of these groups might include:

• people with a disability or mental illness
• the frail aged
• homeless people with support needs
• culturally and linguistically diverse people.

Their needs vary and may include affordable housing, or and housing  designed and built housing so it can be adapted to reflect the users' age, level of mobility, health or lifestyle.

Ethnicity also has a strong influence on the mix and location of housing need and demand. Different ethnic groups have different age structures, household formation rates and fertility rates, and varying tenure, housing type and location preferences.

Some information on special needs groups is available from large data collections such as the Census and the data collection program of the Supported Accommodation Assistance Program.

However, the best information is likely to be obtained by talking to organisations with an interest in and involvement with these groups and with representatives of these groups. Your council’s community services officers would be able to provide you with a list of potential contacts. In cases where special needs groups appear to have large unmet needs, it may be useful to undertake separate research on that group.

Indigenous people

Local areas with significant numbers of Indigenous households will need to consider Indigenous housing needs specifically.  Indigenous people are more likely to be disadvantaged with respect to their housing than the non-Indigenous population. For example, the home ownership rates among Indigenous households in NSW are less than half those of the non-Indigenous population (34 per cent compared with almost 70 per cent).

The housing needs of the Indigenous population raise complex social, cultural and political issues. Housing issues faced by Indigenous households include:

• discrimination in the private rental market
• difficulty finding appropriate dwellings for large extended families
• high levels of poverty, generating acute affordability problems.

Burke and Ewing (1999) address some of these issues, making the following observation:

"Aboriginal and Torres Strait Islander housing need is the greatest of any needs group in Australia. Irrespective of the measure of need, Aboriginal and Torres Strait Islander housing conditions perform badly by comparison with those of the Australian population overall.

Compared to non-Indigenous Australians, Aboriginal Australians face high rates of overcrowding and after-housing poverty, are much more likely to live in improvised dwellings, have much lower levels of home ownership and are much more reliant on publicly provided housing." (Burke, T. and Ewing, S., Housing: Your Local Infrastructure - A Toolkit for Local Government Housing Policies, Strategies and Actions, Municipal Association of Victoria, Melbourne, 1999).

In addition to the Census, another major source of data is the National Community Housing and Infrastructure Needs Survey (CHINS) last conducted in 2001. This survey collected selected information on Indigenous organisations that provide housing to Aboriginal and Torres Strait Islander peoples (referred to as Indigenous Housing Organisations or IHOs). The information collected included details of the housing stock, dwelling management and selected income and expenditure data. More details on this survey are provided in the section on housing supply below.

Other sources of information on Indigenous housing

1. NSW Aboriginal Housing Office — a variety of resources, including publications and a library of Aboriginal housing links.
   
    

2. Australian Housing and Urban Research Institute (AHURI) — reports about Indigenous housing, such as how to consult with Aboriginal communities about housing and a report on how to help Indigenous families into stable housing.

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Future demand

In examining future housing needs it is necessary to forecast both population change and also changes in household formation rates. Population projections are available from the NSW Department of Planning and are included in Table D1 of the Housing Kit Database.

The ABS also produces population forecasts for areas on a contract basis. Many larger local governments produce population forecasts as part of their management plan.

The aim of this exercise is not to produce precise forecasts but rather to develop a broad picture of the likely impact of population and demographic change on the housing market.

Recent mover analysis

Within any area there are many households who may have been living in the same dwelling for a number of years and who have no intention of moving in the near future. These households and the dwellings they occupy are not influencing the type and price of demand for housing.

An analysis of households who have moved into the region recently enables a sensitive picture of housing demand to be developed. Unfortunately this analysis is only possible with the aid of a special run of ABS Census data.

To obtain more information, contact the ABS Consultancy Service by telephone on 1300 135 070, or mailto: client.services@abs.gov.au.

Recent mover analysis examines:

• where households moved from
• where they moved to
• ages of mover households
• type of households who moved
• household incomes of recent movers
• household income by tenure
• household income by type
• types and sizes of dwellings occupied by households
• types of dwellings occupied by area of origin
• tenure of households
• tenure by household type.

Such an analysis enables an estimation of the expressed demand for different types and sizes of dwellings, and permits some conclusions about future growth by reference to the extent of in-migration. (Consider waiting for the results from the 2006 census before considering an analysis of this type.)

Step-by-step summary: Demographic trends

• Examine recent population trends and forecasts for your LGA at Table D1 of the Housing Kit Database.
• Examine age sex breakdown at D2 and construct population pyramids for 1991 and 2001 using the provided Excel template.
• Examine trends in household types and family types at Table D3.· Examine occupancy rate trends at Table D4.
• Estimate proportion of household growth that is population and household driven. · Examine any special needs data that is available and hold discussions with key stakeholders.
• Provide commentary on existing and future demand for housing taking into account the forecasts in Table D1. 
   

Economic context

This section is concerned with the ability of households to afford housing, and discusses household incomes in relation to issues of economic structure and employment trends in a local government area. 

Incomes

Data on household incomes (rather than the income of individuals) are the most relevant to housing market studies because they reveal much about a household’s ability to afford to pay for or contribute toward satisfying their own housing needs. Household income data is available from the Census.

Indicative income parameters that assist in understanding different segments of your local housing market include (figures updated to August 2006):

• Household earnings for very low income households (households with income less than 50% of the median) were $577 or less per week in Sydney and $398 or less per week for non-metropolitan households.
• Household earnings for  low income households (households with income between 50% and 80% of median income) were $578 to $923 per week in Sydney and $399 to $636 per week for non-metropolitan households.
• Household earnings for the moderate-income households (households with income between 80% to 120% of the median income) were $924 to $1385 per week in Sydney and $637 to $954 per week for non-metropolitan households.

The median income data are taken from Table T22 of the ABS Time Series Profile, while the 2001 Household Income data is taken from the Basic Community Profile, Table B31.

The occupation of the residents is an income-related variable that can be used to indicate the LGA’s socio-economic status. Rather than examining the entire occupational breakdown, an occupational index that shows the percentage of Managers and Administrators and Professionals is suggested. This measure is taken from T16 of the ABS Time Series Profile. These income and occupation data can be found in the Housing Kit Database Table E1.

Economic structure

In non-metropolitan areas it is also useful to take into account the economic structure and employment outcomes in the LGA. (In metropolitan areas, commuting patterns make this information less relevant.)

When considering economic influences on housing demand in an area, first examine the industrial structure of a region or sub-region — economic declines and upswings do not affect all sectors of the economy to the same degree. It is particularly important to differentiate between the cyclical unemployment that results from fluctuations in the business cycle, and structural unemployment that results from the permanent decline of a particular industry. Cyclical unemployment often occurs in the construction sector, for example, while structural unemployment might result from the decline in the manufacturing sector. The industry structure for your LGA is available in Table E2 of the Housing Kit Database.

Structural change is affecting many sectors of the economy. There has been continued shedding of jobs in the manufacturing sector, while the financial and information sectors of the economy have been growing strongly. The spatial impacts of these changes on the economy of NSW have led to strong economic growth in the central areas of Sydney, but many non-metropolitan regions have been experiencing stagnant economies and a declining employment base.

Estimates of unemployment rates by Local Government Area are available from the Commonwealth Department of Education, Employment and Workplace Relations, which produces quarterly estimates of Small Area Labour Markets for individual local government areas. These are synthetic estimates based on the ABS labour force survey data.

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Employment trends

There has also been a significant shift in employment patterns from full-time employment to part-time and casual employment This trend may have affected the ability of some households to obtain conventional mortgage finance  for home purchase because of uncertainty about their future income. Alternative lenders with less stringent lending criteria have emerged to cater to this market, but charge slightly higher interest rates.  Indeed, some researchers argue that declining levels of home purchasing in recent years have been a result of increased uncertainties among households about future income streams. You can examine the effect of this trend by looking at the proportion of the local workforce that is employed full time using information from the ABS Labour Force survey provided in Table E3 of the Housing Kit Database.

Step-by-step summary: Economic trends

• Examine Income and Occupation trends in Table E1 of the Housing Kit Database. Comment on the income trends and the current state of “purchasing” power in the LGA.
• Examine the industry structure at Table E2. Comment on the trends in the LGA.
• Examine the unemployment rates and proportions of full time employment in Table E3. Comment on the trends in the LGA.

Housing supply and tenure issues

This section covers issues relating to existing numbers and types of housing and the range of available housing tenures.  These provide a baseline for future housing delivery and allow a comparison to be made between estimated housing need (in terms of housing numbers and housing types) and housing availability.  It also provides advice on tracking local Aboriginal housing delivery and local residential development and land supplies.

Housing stock

The Census Time Series Profile (T18) provides a table that shows the number and proportion of different dwelling types over the last three census periods.
All private dwellings, except diplomatic dwellings, are included in the Census, whether occupied or unoccupied. Caravans in caravan parks, manufactured homes in manufactured home estates, and self-care units in accommodation for the retired or aged, are counted only if occupied. Occupied non-private dwellings, such as hospitals, prisons, hotels, etc. are also included.

The Census characterises private dwellings using the following list of classifications:
1. Semi-detached, row or terrace house, townhouse, etc.

2. Flat, unit or apartment

• In one or two storey block
• In three or more storey block
• Attached to a house

3. Other dwelling

•  Caravan, cabin houseboat
•  Improvised home, tent, sleepers out
•  House or flat attached to a shop, office, etc.

Dwellings are classified as occupied or unoccupied. Unoccupied Private Dwellings are structures built specifically for living purposes that are habitable, but unoccupied on Census night. Vacant houses, holiday homes, huts and cabins (other than seasonal workers' quarters) are counted as unoccupied dwellings. In analysing housing supply it will be particularly important to take account of vacancies in areas with high rates of seasonal visitors. Also included are newly completed dwellings not yet occupied, dwellings that are vacant because they are due for demolition or repair, and dwellings to let. Information on dwelling types in your LGA is available from the Housing Kit Database Table S1.

In addition to the data on dwelling structure, Table S1 also includes data on the dwelling size of each of the main dwelling types as measured by the number of bedrooms (taken from Table X49 of the Expanded Community Profile). It allows you to compare the variety of dwelling sizes by dwelling type in your LGA with other comparison areas. Data is also provided on the number of bedrooms and the number of occupants for each dwelling type.

Tenure

Housing tenure describes the legal mechanism through which a household accesses housing. The two main forms of tenure are rental and ownership. Information on tenure types in your LGA is available from the Housing Kit Database Table S2.

Overall figures on tenure changes can be obtained from the census and this information can be supplemented with data from other sources where available. The Census Time Series Profile (T19) provides a table that shows the tenure type and landlord type. The table records the number of occupied dwellings and people (in occupied private dwellings) in each of the categories listed below for the last three census periods.  Census tenure types include:

• Fully owned
• Being purchased
• Rented, including state/territory housing authority, other landlord type, or not stated
• Other tenure types

Table S3 shows the most up to date data on total bonds and new bonds lodged for the most recent period available from the Rent and Sales Report produced by Housing NSW. It also shows recent trends in bond lodgements. It allows you to track trends in rental supply between census periods.

Low-priced rental stock

Data on  public housing stock numbers is available from the Housing Kit Database in Table S4.

A broad measure of changes in the availability of private low-priced stock is available from published census tables (specifically Table 20 of the Time Series tables that shows the number of properties in nominal rent categories for 1991, 1996 and 2001).

Between June 1996 and June 2006 there was a 33.4 per cent increase in the Consumer Price Index (CPI) for Sydney. Applying this increase in rent to the third lowest rent category in the table of $100-$139, generates a result of $133-$185. This is very close to the next category of $140-$179. This means that if there had been no loss of low-priced rental stock, the number of properties renting for less than $139 in 1996 should be roughly equivalent to the number of dwellings renting for less than $179 in 2006 — or the ratio of the 2006 properties to the 1996 properties should be 1:1.

Ratios larger than one indicate an increase in low-cost rental stock, while ratios less than one indicate a decrease in low-cost rental stock. increasingly, these ratios are likely to show a marked loss of low-priced stock in many high-cost areas of Sydney, especially in inner city areas. Major areas of growth of low-cost rental stock have been in the western and south western LGAs in Sydney and in coastal growth areas.

Some care needs to be used when interpreting these figures, especially in non-metropolitan LGAs. Firstly, they are based on census data and, for example, there were substantial increases in rents in some areas between the 2001 and 2006 census, which would not have been immediately apparent, so the figures may quickly become out of date. Secondly, in some non-metropolitan areas low-cost rental stock has been grown from a very low base, so real gains in affordable rental housing might be quite small. Thirdly, in many coastal locations the main difficulty faced by tenants in accessing affordable rental housing is continuation of supply through the tourist season, not the price of off-season accommodation (Note: the census is undertaken in August).

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Housing supply for Indigenous people

The Community Housing and Infrastructure Needs Survey (CHINS) is an excellent source of data for housing supply managed by Indigenous Housing Organisations. There are two sources of identified Indigenous housing in addition to mainstream public housing  The Aboriginal Housing Office owns about 4000 dwellings, which are managed by Housing NSW. Around another 5000 dwellings are owned and managed by local Aboriginal organisations.

Details of how the CHINS survey is conducted and the procedures for obtaining CHINS data for your area are available from the ABS. 

Residential development

Tracking trends in residential development is a key task for your local market study.  A good source of data is residential building approval data. These are compiled from permits issued by: local government authorities and other principal certifying authorities; contracts let or day labour work authorised by Commonwealth, state, semi-government and local government authorities; and major building approvals in areas not subject to normal administrative approval (such as building on remote mine sites).

Building approval data are collected by the ABS and are published in Building Approvals, Australia. They are also published in the Housing Kit Database in Table S5.

A dwelling (or residential building) is defined as a building consisting of one or more dwelling units. Residential buildings can be either houses or other residential buildings.

Other residential building refers to a building other than a house primarily used for long-term residential purposes. Other residential buildings contain more than one dwelling unit.

In addition to building data, it might also be useful to examine trends in development applications in your LGA. The trends you might like to track are the total number of development applications (DAs), the average number of dwellings per DA, and the names of the developers (where appropriate in terms of building relationships with potential suppliers of affordable housing

Land supply

The amount of serviced land in your locality might indicate whether there are any potential bottlenecks in the construction of housing stock, and help in assessing the potential supply of new dwellings. Shortages of land can have a significant impact on the availability and pricing of dwellings in an area. In new land-release areas, the availability of un-serviced and serviced lots will be relevant, while in established areas redevelopment sites may also be significant.

The Department of Planning may also be approached to provide data on the availability of lots from the Metropolitan Development Program for LGAs in the Sydney Metropolitan Area.

Step-by-step summary: housing supply

• Examine the change in housing supply trends shown in Table S1 of the Housing Kit Database. Comment on the size of stock (number of bedrooms) compared to other areas
• Examine the trends in housing tenure in the area. In particular examine the trends in low cost rental tenure between 1991 and 2001 (Table S2). Compare and update this data from the census by using data for bond lodgements and public housing stock (Tables S3 and S4).
• Use Table S5 to provide an estimate of recent housing approvals in the area.

Knowing the local players

The decisions of a number of ‘actors’ determine the supply of housing. To understand trends in housing, you must know something about the role and motivations of these actors.

A complete analysis of the interaction of all these actors is obviously a large task. Focus on the actors that affect crucial elements of the housing supply (such as new build, low-cost rental accommodation, and boarding house stock) to keep the task manageable and ensure that the main supply-side issues are identified.
Builders/developers

Developers have a major bearing on the type and quantity of housing that comes onto a local market. Hence, it is useful to have some understanding about the motivations of developers and an appreciation of the factors that stimulate or inhibit their activities in an area. Focus on developers who concentrate on the affordable end of the market. 

Your first task could simply be to develop a profile of the active developers/builders in the local market by interrogating your Council’s development application register. Talking to a sample of these developers can provide valuable insight into supply trends in your area:

Private landlords

Landlords have a crucial impact on housing opportunities for low-income households in an area. Information on the motivations of landlords is available at a larger scale (for examples, see Yates, 1996; ABS, 1998) but less information is available at the local level.

There are a number of options for obtaining information on the motivations and intentions of landlords. They range from a traditional survey approach, to the monitoring of a small number of what are considered representative landlords. It will be important to include landlords that control threatened stock such as boarding houses and residential parks. Another possible source of information could be registered estate agents in your local area. Information on landlords operating locally can also be obtained from the Council's Rate Database.

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Public and community housing providers

Housing NSW is traditionally the major supplier of affordable housing to those who have difficulty accessing or sustaining accommodation in the private market.  It is important to establish their plans in the market. A local area plan may be available for your area from Housing NSW. Community housing is a growing component of the NSW Government’s overall strategy of providing housing assistance to those people most in need. Community housing is managed by not-for-profit housing organisations: approximately 16,000 dwellings in NSW are managed by such organisations, which include Housing Associations, housing cooperatives, and other non-government and church organisations. The dwellings are leased from Housing NSW, private landlords and other government agencies or, in some cases, owned by the organisations themselves. Most dwellings provide medium to long-term residence and about 10 per cent are used for crisis accommodation. Information on community housing associations in your region is available from the Office of Community Housing.

Local councils and their policies

Your own local council has a significant influence on the quantity and quality of housing within its boundaries. As already discussed, this influence is exerted through two main policy instruments: building regulations and land-use zoning.

Councils sometimes operate to protect the status quo, responding to the desire of some residents to maintain the residential amenity of the area, which is usually defined in terms of a low-rise, landscaped, detached housing environment. Such an approach may restrict the housing opportunities of other groups and the development of other housing types. Such a policy also fails to acknowledge the changing nature and mix of Australian households. However, on the other hand, maintaining the status quo can help to deter the displacement of residents and hence the  breakdown of established social networks in the local residential community.

The task here is is to discuss the impact of the council codes/regulations on housing opportunities within the area. Information about the impact of local council policies may be available from the dialogue you have established with local developers (see above in the Builders/developers section).

Resources: Housing market analyses produced by Housing NSW

Housing NSW produces new or updated reports analysing local housing markets on request for local governments. The available analyses may be accessed here. Note that all the analyses use the 2006 Census data.

Explanatory notes and information sheets:

For further information on these housing market analysis reports, contact  Philippa Davis, Senior Housing Analyst, Portfolio Strategy and Planning, on 02 8753 8525 or philippa.davis@housing.nsw.gov.au

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