How the housing construction cycle ends

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From UBS:

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Auction clearance rates – while only a sub-set of the broader market – have weakened sharply over recent weeks, adding to prior months corrections lower (Figure 9). The current level of clearance rates has in the past been consistent with ‘flat’ house price growth. Despite this, the level of auctions volumes has strengthened by 20% over the past two months, a more positive signal. The recent renewed slowing in housing lending (Figure 10) also flags another period of slower house price growth over the next few months.

 While the lag between new starts and activity suggest housing construction will continue to add to Australia’s GDP growth for much of 2016, the recent further slide in (local) consumers’ perceptions of whether now is a good time to buy a dwelling (Figure 11) suggests the recent moderation in the pace of building approvals is likely to continue to ease from its recent record pace.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.