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Property markets reaching saturation point

Property markets reaching saturation point

Housing oversupply

The number of dwellings in capital cities is eclipsing or beginning to eclipse Australian population growth, an economic forecaster has warned.

BIS Shrapnel says the recent home building boom expected to peak this year differs from previous peaks.

“Investors and foreigners are driving this and the preference away from detached houses towards apartments. It’s a very different boom, so it’s a question of what happens next,” BIS Shrapnel’s associate director of building forecasting Kim Hawtrey told nestegg.com.au.

“We're probably going to touch or come close [to] touching 240,000 dwelling commencements at the peak of this boom, and building will probably stay at a pretty healthy level, around 200,000 commencements for the next few years,” Mr Hawtrey said.

“When you’ve had such a unique home building boom, is it sustainable? Is it driven by fundamentals? Are we building far too much than we should?”

For many Australian capitals, that rate of new dwellings is outpacing or will outpace the number of Australians who require them.

“We’ve had such strong population growth so [the rate of building] is justified, particularly somewhere like Sydney where for a decade we simply didn’t build enough dwellings,” Mr Hawtrey said.

“It’s justified building above the rate of household formation, above the rate of population growth and we can afford to do that for a number of years, particularly in Sydney.”

While construction has yet to reach saturation point in Sydney, other cities have already surpassed it.

“In the other markets, we’re nearing or already at the point of saturation, where the number of homes for people to live in is at or increasingly above the number of people to live in them,” Mr Hawtrey said.

“Certainly, in Perth and Adelaide we see that, while Brisbane is probably at that point now. Melbourne is approaching that point.

“Sydney is not yet at that point. We think Sydney will go stronger for longer just because it’s got more people to house basically.” 

Property markets reaching saturation point
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