Apartment glut could be ‘short-lived’, says economist

A leading Australian economist has predicted that Australia will see an oversupply of apartments in 2017, but suggested that any oversupply will be “short-lived” due to Australia’s “favourable demographics”.

Speaking to Mortgage Business, former chief economist of Citibank and senior economic adviser to the Australian Prime Minister, Stephen Koukoulas, said: “I think 2017 will be a year where we do see an oversupply of apartments… there will be occasional news headlines where someone who bought off the plan for, let's say $700,000, has had to give it up for $500,000… but we have to remember we still have favourable demographics.” 

Mr Koukoulas explained that Australia’s population growth (both natural and through immigration) will help weather any oversupply, meaning it could be short-lived. 

He told Mortgage Business: “Australia's going to have another million people in three years’ time, and three years after that, another million people, so if you've got a 10-year time horizon, Australia could have three million more people.

“So, let’s say we've got an oversupply of 50,000 apartments, they'll be absorbed within a year or two. The problem could be short-lived; being a year.” 

The economist added: “I look at these things from a multi-year time horizon and we saw in the recent building approval numbers a big fall in apartment building approvals. So, perhaps the market's adjusting already. 

“If we don’t build to the same rate for a year or two, and the market force corrects the oversupply, the oversupply will be absorbed by the population growth. 

“So, in a year or two we could be back in equilibrium. And then, if we have an under-building, which seems to happen in the glorious property cycle in Australia, we could even get a shortage occurring in two or three years’ time.” 

Although Mr Koukoulas says he remains “optimistic” in regards to the economy and property market, he says he isn’t “blindly optimistic or looking at everything through rose-coloured glasses”, adding that there will naturally be “pockets of weakness”. 

“But”, he adds, “favourable demographics are gold. They're the thing that overwhelm any other particular issue in the housing market.” 

Better Business Summit 2017

Stephen Koukoulas will lead a fascinating session on the future of property markets and the Australian economy at the Better Business Summit 2017. He will identify how the economy and market will influence customers’ ability to secure finance and manage their mortgages and reveal what they need to know to make better buying and investing decisions.

The economist will also identify population and growth hotspots in Australia that will underpin property price growth and yields, and expose the no-go zones investors should be avoiding.

Now in its fourth consecutive year, the award-winning Better Business Summit runs across five cities over February and March, and features a jam-packed agenda crammed with practical tips, tools and strategies to help all brokers grow their business.

The day will culminate in the Better Business Awards, where each state’s best brokers, aggregator BDMs, lender BDMs, loan administrators and those running community engagement programs will be honoured. A list of finalists for the awards is out now.

With limited tickets remaining in each state, book your seat now to make sure you don’t miss out.

[Related: Tighter lending curbs to halve price growth in 2017: HSBC]

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Annie Kane

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