Property News & Updates

Large Demand Outpaced Property Supply

New home construction

The possible shortage of housing, triggered by the slowdown in construction, would push up property prices, market analysts claim. Residential construction activity for both apartments and houses dropped faster than expected by the Reserve Bank, with the central bank predicting a further 7 percent decline in residential investment over the coming year.

“Given the large size of the pipeline, we had expected construction activity to remain at a pretty high level for most of this year, but it turned down sooner and by more than we had expected,” “The effect of the downturn in housing construction on the broader economy, though, is likely to be somewhat larger than 1 percentage point given the linkages the sector has with other parts of the economy,”says RBA deputy governor Guy Debelle.

“There was a large increase in demand, which outpaced the increase in supply. Some part of the increase in demand as a result of lower interest rates, but there were other factors such as population growth and foreign demand. “ “Those factors played out differently across the different cities, contributing to the difference in price dynamics. But again, it is worth remembering that the same interest rate applied across all of the cities across the country throughout their considerably different price cycles. “ “This has particularly been the case over the past decade. This is in contrast to the cycle from the mid-1990s to the mid-2000s, which was more uniform and more clearly related to the shift down in the nominal interest rate structure.” says Mr. Debelle.

Property developer Stockland is speeding up the pace of construction to address property unit shortage that it says will become evident next year as a result of stronger consumer and retirement living markets that correlate with a downturn in new housing begins. Signs of a shortage are becoming visible in Sydney and Brisbane, according to Stockland.


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