Via Damien Boey at Credit Suisse:
Housing arithmetic in a new regime
In the year-to-4Q 2017, the Australian population grew by 388,056 people to 2,478,2303 residents. According to the 2016 Census, the average number of people per household is 2.57894. Assuming this number remained steady throughout 2017 (an optimistic assumption), household formation was about 150,471 (388,056 divided by 2.57894).
Now it is possible for replacement housing demand to rise as high as 25,000 per annum. Therefore, an optimistic estimate of underlying housing demand is around 175,000 per annum. This is below the current level of dwelling completions of around 210,000 per annum. In other words, Australia is in a situation of marginal housing oversupply to the tune of 35,000 per annum. Consistent with this state, house prices are falling moderately.