So we can put the undersupply myth to bed then..

The undersupply myth is not a new subject for this blog; but today we ask, has the day arrived when everyone else has finally woken up ?

The property market could be set for early-year price falls due to a build up of unsold properties, with new figures by property research company SQM Research showing the number of listings swelled 44% over 2010.

Managing director Louis Christopher says while a short-term monthly slowdown in the capitals can be attributed to the Christmas period, (online listings dropped 1.9% in December), overall the huge number of listings means prices are now hanging by a thread and a market downturn is imminent.

“It’s still very clear to us that they are now at levels that would suggest a downturn in the housing market, although the stock levels have fallen seasonally. The overall number is up now by 44% across the nation. “

“I wouldn’t like to see another interest rate rise anytime soon – it will accelerate the downturn.”

The claim contradicts predictions that prices will remain stable or grow by 5-6% growth range in 2011 due to an underlying shortage of properties.

The new figures suggest that the shortage has been overblown. Residential property listings were 328,270 during December, representing an increase of 44.9% over the year.

Please see one of our most popular posts where we discuss “undersupply” in detail.

Last year according to RPData Australia built 170,000 houses while the population growth was falling very quickly. In the year to June the population grew by 377100 , which means that once again Australia overbuilt.

Again we state:

At end of every bubble there comes an admission that the “undersupply” of housing was in fact a debt driven myth that only really existed because there was an oversupply of speculators. As the market collapses these people disappear and all of a sudden there are too many dwellings on the market and not enough buyers

We can only say we warned you.


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Comments

  1. Birch Creek Trader

    CJ seems to hold to his thesis though – "Because Australia suffers from quite acute housing shortages we shouldn't expect to see any significant falls in prices." June 2010
    Even with the unbelievably expensive method that developers must take to bring new stock to the market (posted wonderfully by the Unconventional Economist), there has been no undersupply whatsoever.
    Pardon the pun, but to say there is a "acute shortage" in 2011 is delusional, at best.

  2. Leith van Onselen

    What CJ and his fellow spruikers fail to recognise (or at least say publicly) is that unresponsive supply is a two-edged sword. It makes house prices highly volatile, so that prices rise further on the way up and crash harder on the way down.

    You can see this in the USA where the supply-restricted states bubbled then burst whereas the supply-responsive states' prices remained stable (see The Truth about the US Housing Market).

    At this stage of the housing cycle, Australia's unresponsive supply is a curse not a saviour.

  3. Birch Creek Trader

    I agree Leith; he is another in a multitude that mistake risk for volatility and comparing shares with houses (declaring the former "risky" because their prices move due to multiple transactions and high liquidity and the latter "not risky" because of very minor movement, but extremely low liquidity).
    I know its far too early, but I wonder about the effects of the QLD floods on housing supply and the market in general.
    It would be fair to say that thousands of houses have now lost huge amounts of intrinsic value: because they built on known floodplains….the development at the former Amazon's waterpark site at Jindalee comes immediately to mind.
    These floods are probably the "Black Swan" that sends our economy into at least a mild recession, and the value of the AUD down significantly, given the amount of money the QLD and FED government need to borrow to rebuild..