BIS Shrapnel is warning of a imminent housing glut by 2018, which it argues will hit Melbourne’s and Perth’s markets most severely. From The AFR:
The national undersupply, which peaked at 108,000 homes last financial year, will fall into a net glut of over 12,000 dwellings in the year to June 2018, as completions from the sustained surge of building activity come on line, forecaster BIS Shrapnel says in its Building in Australia 2015-2030 report. It will then deepen for at least the next two years.
But the headline predictions mask regional variations showing that even though Victoria – through apartments – and WA – through houses – will bear the brunt of the slowdown after years of rapid production, NSW will expand its level of construction as it tries to overcome what will remain a deficit of housing…
New-dwelling starts – which topped 200,000 for the first time in the 12 months to March – will fall from an expected peak of 210,000 in 2014-2015 to almost 164,000 in 2018.
The imbalance is clear from the fact that even as oversupplied Victoria and a mining bust-hit Perth go into an oversupply in June 2018…
There’s nothing new here, but the narrative fits broadly with MB’s forecast that dwelling construction will fall alongside the decline of mining capex and the shuttering of the local automotive assembly industry, thus dealing a triple hit to jobs. The glut will be larger and earlier than BIS predicts.
Indeed, the outlook for Melbourne and Perth are the worst.
Looking at Melbourne first, dwelling unit & apartment commencements surged by an incredible 42% over the March quarter and by 57% over the year, signalling that a tidal wave of new apartment stock will soon hit the city:
There’s more apartments on the horizon, too, with unit and apartment approvals in Victoria hitting a record 10,336 in the three months to May 2015, with total dwelling approvals also at an all-time high 18,846:
Meanwhile, Melbourne’s population growth is past its peak.
To illustrate the impending glut, below is a chart plotting Victoria’s overall dwelling construction against population growth:
And here’s another plotting the rate of approvals – houses, units and total – per 1,000 residents:
Both are at unprecedented levels.
In Western Australia (read Perth), dwelling commencements have recently fallen from their highest ever level, but remain elevated:
As are dwelling approvals:
However, population growth is crashing through the floor, pointing to a massive impending dwelling glut in Perth:
Meanwhile, the construction industry is a major provider of full-time jobs in both jurisdiction – 10.6% in Victoria and 13.7% in Western Australia – signalling tough economic times once dwelling construction unwinds and, in Perth’s case, mining investment collapses (see below charts).
