Australia’s housing market to tighten in 2020

With last week’s release of Australia’s population data for the March quarter, it’s once again time to examine how Australia’s dwelling supply is tracking against population growth.

The below charts track the following, which are based on the latest available quarterly data:

  • Dwelling approvals to June 2019;
  • Dwelling commencements to March 2019;
  • Dwelling completions to March   2019; and
  • Population change to March 2019.

First, the national picture shows that dwelling approvals have collapsed with commencements following. Completions are about to peak, whereas population growth was strong at 388,800 in the year to March 2019:

Overall, dwelling construction is facing an epic bust with commencements / completions about to turn down hard. And this comes at the same time as population growth continues to run rampant.

Next is NSW, where after lifting to unprecedented levels approvals have collapsed, with commencements starting to follow. However, completions are peaking, whereas population growth remains strong:

In VIC, both dwelling approvals are also crashing, with commencements starting to follow. Completions also fell but will probably pick-up in the short-term as they follow the latest commencements peak. Population growth is still turbo-charged, albeit has moderated slightly:

In QLD, dwelling approvals are also crashing, with commencements and completions still to follow. By contrast, population growth into QLD has risen strongly over recent quarters:

The construction cycle in WA continues to unwind abruptly with approvals, commencements and completions all plummeting. Meanwhile, population growth has rebounded after crashing recently; albeit remains at very low levels:

SA’s housing market was headed into oversupply, although the situation could be changing with population growth accelerating just as dwelling approvals and commencements are retracing:

To summarise, while the housing market has hit oversupply as the plethora of homes are completed, the collapse in dwelling approvals and commencements suggests that construction will bust later this year and into 2020. This will likely lead to heavy construction job losses, as well as tightening rental vacancies into 2020.

Other things equal, this points to higher rents in the future; although this will also depend on what happens to wage growth and unemployment.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. unemployed can’t pay higher wage. lower wages will trigger 2-3 families to live under one roof – lot of young couples will (I think already doing it) move back with parents while leasing their own houses or apartments – extra rental stock without building activity.
    Also, I mentioned this couple of years ago, as China slows down further, Chinese will leave their tradition of keeping apartments empty and will start to rent them out in order to feed themselves. How many empty apartments do Syd and Mel have? If this happens we will experience the biggest surge of rental stock in our living memory – and all without building a single building. If Chinese start leasing their empty apartments I’d say rents will fall by over 30% in both Syd and Mel.

      • People will move in together. But not fast enough to create an oversupply of dwellings. So things will continue to grind on much in the same way as we’ve seen over the last however many years.

      • the quality of the migrants Aus imports right now will have no idea what they are getting into. Similar to The Big Short when the two dealers were bragging how they are issuing NINJA loans to migrants. We will be letting new migrants to live in potential infernos and pretend nothing to see here.

    • ErmingtonPlumbing

      I was working with an electrician friend yesterday and he is convinced free standing house prices have bottomed out in Ermo and Rydalmere where we both live.
      He was lamenting the fact he didn’t buy in during “the dip” like his builder mate who got a place in Rydalmere for under 900k!
      He’s going to clean up big time he tells me.
      He seemed bewildered at my lack of agreement on the subject.

      • mate, people literary think prices will now grow again at 20% p/a for the next 10 years. I have mates who think same.. some with uni degrees and very strong in maths but clearly no clue about logic. lol
        no one stops to think who can afford $3m loan unless wages keep pace..

        • reusachtigeMEMBER

          Logic… LOLOLOL… A tool of the relationsless. These guys are right. They are actually the smart ones by not over-analysing the situation. They will clean up for sure. Meanwhile youse lot will be whinging on blogs like this for another 5 or so years until the next cyclical negative sideways movement where you’ll scream “look, see, it’s a crash this time I tell yas” and you will miss that opportunity too. Youse have mental retardation issues that need medical solutions.

          • You know what, you’re actually right. I spent too many years over-analyzing the situation when I should have just joined the stampeding herd.

            It pays to be ignorant sometimes. No sarc/

          • Dom, alternatively, you could say,like me, that you either didn’t look at things simply enough (cynical about human nature), or didn’t consider enough factors in your analysis (government and central bank interventions, effects of interest rates, etc).

            I’m finding that being both broadly cynical and analytically holistic is helping my picks these days…

          • The tard formerly known as bcnich

            Aaaaahahaha absolutely agree with the mental retardation thing. Dominic is a prime specimen of such!

  2. MountainGuinMEMBER

    So what’s the chance of pop growth increasing to 600k p.a. to try fill the economic void….

    • They can build a special economic zone in South West Sydney. Rows of Soviet style grey apartment blocks and huge factories. Here imported human capital can work for indenture wages. Those who survive for 5 years will be given citizenship and a $100k government grant towards buying a property.