Australia's housing market is oversupplied. Yes, oversupplied

[redwing]

I hadn't seen this commentary posted here before so have pasted and linked below

By Michael Matusik
Wednesday, 31 August 2011


Australia’s population growth has slowed by close to 150,000 in just two years, with a 100,000 drop in the actual growth rate over the last 12 months. As a result, the underlying demand for new housing has dropped from 180,000 starts per annum to around 125,000. While dwelling starts are declining, we are now building too much stock.

Unless new housing starts decline in earnest or population growth accelerates, Victoria, South Australia, Tasmania and the Northern Territory face an oversupply. Perth and Canberra are better positioned, with Queensland currently at equilibrium and New South Wales undersupplied.

Much of Victoria’s potential pain lies in Melbourne’s recent inner-city apartment boom, during which an unprecedented proportion of the state’s new dwelling starts are apartments. This mostly speculator-fuelled surge has provided some very misleading media headlines of late about the rise of apartment living and how it is becoming the new Australian dream. Yet two-thirds of Australians continue to buy a detached dwelling.

What?! This cannot be right. The housing industry and banking economists keep reminding us how undersupplied the Australian housing market is. Don’t we have a shortfall of something like 300,000 new homes across the country? And isn’t this shortfall going to double in size within the next decade?

But I ask you, with an average of 2.6 people per dwelling (as per the 2006 census), where are these 800,000-odd displaced people living? Yes, too many are living it rough, but 800,000 people equate to two cities the size of Canberra or one and a half of the Gold Coast. Where are all these people living? I don’t see thousands sleeping in cardboard boxes in Queen Street, for example.

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[Ausprop]

the argument is simple to settle - look at the price. rents are cheap so I agree it is oversupplied

 

[House_Keeper]

interesting. some good arguments there. Matusik used to be bullish in property. I suspect his change of tune has something to do with the Brisbane market, where he is based.

In Sydney, I'm not sure that it the case. The rental market is definitely not oversupplied. The sale market is suffering from poor sentiment, but it's not as if a huge oversupply was about to hit the market, with the banks being restrictive with development finance.

 

[tom32]

interesting. some good arguments there. Matusik used to be bullish in property. I suspect his change of tune has something to do with the Brisbane market, where he is based.

In Sydney, I'm not sure that it the case. The rental market is definitely not oversupplied. The sale market is suffering from poor sentiment, but it's not as if a huge oversupply was about to hit the market, with the banks being restrictive with development finance.

Looking at completions you could see even 12-18 months ago Melbourne was heading for the same fate as Perth and BNE who had cracking building activity around the middle of last decade.

Sydney is different at this stage and has not overbuilt since around the time of the GST introduction. Any moves by the new Liberal government to free up land release and decrease the cost difference between new and existing (which they are into now) is not going to have an effect for at least 12 months.

Just watch those completion levels. If they are building too much price is out of kilter with production costs and eventually price will fall. This has not happened in Sydney since around (mostly before) the introduction of the GST.

 

[Aaron Sice]

I have up reading matusik long ago. The barrow he pushes is flouro orange and sticks out like dogs balls.

 

[Sheryn]

But I ask you, with an average of 2.6 people per dwelling (as per the 2006 census), where are these 800,000-odd displaced people living? Yes, too many are living it rough, but 800,000 people equate to two cities the size of Canberra or one and a half of the Gold Coast. Where are all these people living? I don’t see thousands sleeping in cardboard boxes in Queen Street, for example.

Redwing
I have travelled in Central Australia for many years and there are lots of people who live in caravan, campervan or motorhome etc. either free camping or moving from caravan park to caravan park.

And don't forget some families may have a large number living in their house.

Do the above figures take into account the number of Aussies living overseas?


Cheers
Sheryn

 

[lizzie]

DA applications in Newcastle are at an all-time low. Down to around 25% of normal. Things might not be super tight now but in another few years with no building being done ...

However, the rental market is tight and properties are still selling. Maybe we're bucking the trend.