Australia’s home market a firmly split duality

Australia’s housing market has emerged as two firmly split opposing forces according to the Housing Industry of Australia’s principal economist.

Tim Reardon from HIA made the comments this week at the HIA Industry Outlook event held in the nation’s capital.

Mr Reardon said while the supply of homes was easing affordability, the glut of properties and lower prices were driving down demand for new home construction.

The HIA principal economist pointed out that up until 2014, house prices had always been forced up thanks to restraints on new home building – restraints that have now lifted in an attempt to ease affordability.

“The stalling of rental price inflation in the June quarter this year is the most important indicator as it tells us that the pent-up demand for new housing in Sydney and Melbourne is beginning to be met with a record volume of new housing,” he said.

Mr Reardon said falling prices will mean weaker demand and a cooling market.

“The fall in house prices will dampen demand for new housing over the next 12 months,” he said.

“Add to this the proliferation of punitive taxes on investors in the housing market, disincentives to overseas buyers and tighter oversight of mortgage lending for home purchases and the environment for residential building is facing significant challenges.”

On the other side of the coin, there are some sections of the property market and locations that are expected to only experience moderate downturns.

One of those is detached house starts, which in March this year recorded the best quarterly result in nearly 20 years and Mr Reardon expects the strong figures to continue.

“Leading indicators suggest that we should expect another strong result for the June 2018 quarter,” he said.

“On this basis it now looks like we will round out the 2017/18 year with over 120,000 detached house starts.”

“This would be the strongest four quarter performance for the sector since the mid-1990s.”


News & Resources