23 Jul Is a building oversupply problem only 3 years away?
Construction has been performing well across Australia for the past few months, but BIS Shrapnel believes that Australia could soon be facing an oversupply of property.
Releasing its Building in Australia 2015-2030 report, the group suggested that low interest rates and strong population growth could mean that more properties than necessary are being built. Not only will the country find itself with declining prices, but there’s a chance that remedial roof maintenance will be needed to prevent buildings falling into disrepair.
Associate Director with BIS Shrapnel Kim Hawtrey said: “With investors and upgrader/downsizers providing enough momentum to sustain activity at historically strong levels, we estimate that the national deficiency will have been largely satisfied by 2018.”
Sydney and Melbourne are forecast to see the biggest declines in affordability, which will limit demand for the time being. However, it could be just a few years until this trend is reversed and the market finds it more difficult to sustain prices.
The Housing Industry Association (HIA) recently noted that the national house building sector had seen a positive start to the year. Construction activity during the three months to March was the second-highest quarterly level on record, as 53,900 dwellings were given the go ahead.
Commenting on the ABS data, the HIA noted that during the 12 months to March, a total of 205,000 residential projects were given the go ahead. This made it the first time that the 200,00-mark had been exceeded, but there are expectations that this could be breached during the June quarter.
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