Five years after housing construction started to fill the gap of declining mining investment, HSBC believes national housing supply is now close to being worked off.
In his Downunder Digest report, released this week, HSBC Australia and New Zealand chief economist Paul Bloxham notes that while there are some signs of oversupply in in Melbourne, Brisbane and Perth, Sydney still appears to have an undersupplied unit market. Meanwhile, the detached housing market does not appear to be over-supplied.
“The housing construction boom is now near its peak. Building approvals have fallen sharply in recent months,” Mr Bloxham said.
“Importantly, though, given the lag between approvals and completions – which has been elongated by the large number of high-rise apartment buildings under construction – and the large stock of work-yet-to-be-done on approved dwellings, we do not expect construction to start falling until late 2017,” he said.
“Like ships passing each other in the night, we expect housing construction to start falling around the time that mining investment stops its decline.”
According to Mr Bloxham, Australia’s investment outlook is then expected to be supported by mine maintenance and repair, infrastructure investment and the business investment needed to support services exports, such as tourism and education – Australia’s next growth engine.
“Having added housing supply, we expect house price growth to slow in 2017,” he said.
“Oversupply of apartments in Melbourne and Brisbane could see price declines in those markets. However, having not built many detached houses in recent years, we think that any apartment market shake-out is unlikely to spill over to the detached market.”