- Tags: property investment, property trends
One of the factors insulating Australian property values from the catastrophic falls experienced in the UK and USA is high levels of immigration combined with an historic shortage of supply. The volume of new residential construction fell in the June 2009 quarter for the sixth consecutive time, indicating that this supply problem and its upward influence on prices won’t be easing anytime soon.
Australian Bureau of Statistics (ABS) figures show that work on new residential dwellings fell by 1.2 per cent in the June quarter to an annualised worth of $33.2 billion – down 6.5 per cent on last year.
Comparing each state reveals where new construction performance has fallen:
• South Australia fell 1.8 per cent
• NSW fell 0.4 per cent
• Western Australia fell 0.2 per cent
However, two states benefited from lifts in new dwelling construction:
• Victoria increased 5.5 per cent
• Tasmania increased 5.6 per cent
With official interest rates tipped to rise at each of the next three Reserve Bank of Australia (RBA) meetings, new housing supply is likely to be further constrained in the immediate foreseeable future. This is just another problem in a mix that incorporates projects that are bogged down in the approvals process, a lack of available finance, plus the perennial issue of residential land shortages and skilled labour shortages Australia-wide. Any recent gains in affordability may soon reverse as a result.
Even though interest rate increases will probably be between 1.5 and 2 percentage points in the next 12-18 months, they’re still historically low. The recent fall in unemployment means the economy is travelling better than expected and this will positively influence confidence in job security – something previously considered a threat to the property market’s stability. However, if increased spending is the result, inflation may also increase, thereby convincing the RBA to keep lifting interest rates in an attempt to keep inflation under control.
With first home buyers expected to be less prevalent in the marketplace in the coming months, due to the phasing out of stimulus, there will be less demand and hence less pressure in the $250,000 to $450,000 price range. Sales may therefore decline marginally, but not noticeably until the first quarter of next year.
While Australia’s chronic supply problem remains a threat to affordability and the great Australian dream of home ownership, this endemic problem has shielded Australian homes from potentially large losses and looks set to continue to do so for the foreseeable future.
by David Hamilton
Australia's Undersupply of Housing - A Perennial Problem
palmbeachfn.com.au October 1009 First National Palm Beach 15 Palm Beach Ave Palm Beach, Queensland 4221
Phone:
07 5559 9600