From Mac Bank:
For year’s Australia’s net migration data shows that people have come, but building approvals – and housing affordability – demonstrate that we’ve underbuilt. Now the opposite looks to be occurring. At a time when residential construction activity looks to finally be picking up, the pace of population growth is in decline – thanks to falling net overseas migration.
Population flows are influenced by relative economic growth differentials. As the mining investment boom passes through to the less labour-intensive production phase, the pool of lucrative opportunities in the Australian labour market is shrinking – for locals, as well as skilled foreign workers.
The combination of falling population growth and rising housing construction is one that is best avoided, or managed very carefully. With investors accounting for more than 50% of new housing loans, and multi-res dwellings accounting for more than 50% of dwelling approvals, the risks lie with the financial stability concerns the RBA raised in last week’s FSR potentially intensifying. This, along with the weakness in non-residential construction approvals, is raising the importance of the normally mundane monthly building approvals release. A growth baton needs to be found, fast.
Here’s the chart:
Choked and unresponsive markets in action as supply comes but too late, exacerbating both upside and downside risks.
