Australia Property

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‘Housing market will be oversupplied now building has peaked’
THE AUSTRALIAN JULY 20, 2015 12:00AM

Kylar Loussikian

Journalist
Sydney
Turi Condon

Property Editor
Sydney

Australia’s housing market could be oversupplied within three years, with the residential building boom already at its peak, says analysis released today by economic forecaster BIS Shrapnel.

As submissions last week to the parliamentary inquiry into home ownership continued to stoke the debate on housing affordability, BIS Shrapnel found the surge in home building would lead to a “mild oversupply” by 2018.

Dwelling starts reached a ­record high of just more than 210,000 in the last financial year, after 16 per cent growth, according to BIS Shrapnel’s Building in Australia 2015-2030 report.

“Low interest rates have unlocked­ significant pent-up demand­ and underpinned the current boom in activity, but as population growth slows while construction activity remains strong, new supply will begin to outpace demand,” associate director Kim Hawtrey said. “This will see the national deficiency of dwellings gradually eroded and some key markets will begin to display signs of oversupply.”

The latest figures estimate housing stocks reached a nadir of 108,000 in June last year, climbing to a deficit of 85,000 by the end of the past financial year. The fall in activity would mostly be felt in the higher-density apartment market, Dr Hawtrey said.

Western Australia is expected to see the sharpest slowdown, with residential building starts forecast to fall 13 per cent in 2015-16.

In Melbourne, pockets of oversupply will cause building to slow, with starts dropping 7 per cent for Victoria, says BIS Shrapnel. NSW is the only state expected to see growth this financial year on the back of a strengthening economy and a prolonged lack of building, while dwelling starts in Queensland are expected to be flat.

On Thursday, a UBS research paper noted a significant lack of new apartments in Sydney had hidden a looming glut in Melbourne and Brisbane, with the number of apartments set for completion across Australia’s capital cities surging to 40,000 a year within three years.

Developments in Sydney are spread across the inner city, providing a buffer to the market in the event of a ­correction, the UBS note reads.

The latest Housing Industry Association figures, for May, released­ this month, show dwelling approvals remain at record­ highs, rising 2.4 per cent to 19,414 compared with 18,964 in April.