Correction Only Escape For Housing Market

Huntley Mitchell and Nick Bendel assert in an article for The Adviser that Sydney may be the only capital city to witness experience undersupply in 2016. The Harbour City is currently facing frenzied apartment construction activity, and yet over the course of the next three years, it may not be supplied with enough properties.

Every capital city except Sydney suffering from oversupply

On the other hand, even Brisbane, which has found a lot of respect in the housing market lately seems its getting flushed with apartments. At the pace construction is going on there, it may soon be fully packed. Western Australia is already reaching a point of abundant supply and this can be put down to slow population growth and fall in net interstate migration.

Foreign investment only escape from housing market correction

Unless foreign investors remain buoyant about the Melbourne and Brisbane market, there will definitely be a correction soon. A modest correction, however, may not do enough damage control and may only bring about a more ferocious fall in 2017 and 2018.

You can read the original article here.

Dwelling commencement is not equal to dwelling completion

I think that the pace of construction is not a wholesome reflection of the market appetite. The dwelling commencement figures are nowhere near to being an optimum mirror image of the dwellings completed. Red tape and government protocols come in the way of certain projects. Others may be marred by dubious clauses like the Sunset Clause being enforced by developers. Be that as it may, the oversupply situation is rampant across Australia.

Sydney has been able to buck the trend

If Sydney has been able to beat the tide it is because the city has registered phenomenal capital growth and it has brought about a change in the demographic and the gentrification trends. With more people moving in (more net interstate migration happening) and a relatively healthy population explosion, the supply of detached houses and apartments, despite being robust, has not been able to meet the demand.

A possible turn of events

It may be worth noting how the housing market reacts to a hike in cash rate and subsequently the interest rate. For all we know, it may suddenly increase the debt ratio of households. With them getting squeezed a bit, the oversupplied stock might be in the danger of turning into a “brick and mortar” inventory.