As Geelong faces a significant decline in housing approvals, the region’s economy is at risk of stagnation, particularly impacting essential workers such as teachers, nurses, and retail employees. During a recent presentation at the Geelong Chamber of Commerce Economic Breakfast, KPMG urban economist Terry Rawnsley highlighted the urgent need to address the housing market’s challenges.
Over the past five years, approvals for dwellings priced between $500,000 and $600,000 have nearly vanished. Mr. Rawnsley noted that these approvals have plummeted from 20 percent to just 1 percent of total dwelling approvals in Geelong. This decline has coincided with a rise in luxury home construction, which has further inflated overall housing prices in the region from 2018-19 to 2023-24.
In his analysis, Mr. Rawnsley reported that dwelling approvals fell to approximately 3,000 in the financial year 2024-25, marking a stark contrast to the peak of nearly 6,000 approvals during the 2020-21 “super-cycle.” He emphasized that maintaining an approval rate between 4,000 and 5,000 is crucial for sustaining housing supply and affordability.
Rising Costs and Economic Implications
The increase in construction costs, which have risen by 30 to 40 percent, has made it increasingly difficult for developers to offer affordable housing options. Mr. Rawnsley explained that while areas like Armstrong Creek have traditionally provided affordable housing stock for first-time buyers and renters, the soaring construction prices have pushed many homes into higher price brackets.
“We’ve seen a pretty big drop in supply coming through,” Mr. Rawnsley stated. “The price point has shifted, and that whole segment has disappeared.” He warned that without sufficient affordable housing, median prices will continue to rise, making it increasingly challenging for essential workers to live in Geelong.
The economist also raised concerns over the impact of rising interest rates, which have increased on 13 occasions, further constricting the purchasing power of potential homeowners. He urged local governments to address infrastructure charges in the northern growth corridor to prevent excessive costs that could deter development.
Strategies for Improvement
To alleviate the housing crisis, Mr. Rawnsley suggested that increasing the supply of affordable apartments in central Geelong could be beneficial. He advocated for a “salt and pepper” development approach, which would involve introducing a few affordable townhouses in existing suburbs at accessible price points.
He emphasized that while simply increasing supply may not lead to lower housing prices, it could prevent further declines in affordability. “The horse has bolted on that front; it’s really about stopping it from getting worse,” he said.
Moreover, Mr. Rawnsley called for collaborative efforts from state and federal governments to manage developer contributions effectively. Direct funding or loans to councils could help deliver crucial infrastructure in new growth areas, which is vital for stabilizing home prices.
Geelong’s housing sector plays a pivotal role in the local economy, providing homes for those filling essential roles. Without affordable housing options, businesses may struggle to attract and retain talent, leading to slower economic growth and reduced vibrancy in the city.
As Geelong navigates these challenges, the urgent need for strategic planning and collaboration becomes increasingly clear, necessitating a concerted effort to ensure a thriving community for all its residents.
