Property boom ‘ending’
The capital city residential property booms are coming to an end, with many markets moving into oversupply, new forecasts warn.
BIS Shrapnel’s Long-term forecasts 2016-2031 paints a bleak picture for investors hoping for significant capital growth over the coming decades, predicting that weakening economic conditions will have a negative knock-on effect for property prices.
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
“[Economic] growth will weaken over the subsequent two years as mining investment continues to decline, as residential building runs out of steam and falls sharply, and as parts of non-dwelling building plateau. The main contributor to growth at that time will be rising public infrastructure investment,” Richard Robinson, senior economist at BIS Shrapnel said.
“Accordingly, we expect employment growth to slow and households to react to slower jobs growth and weaker residential property prices by reeling in discretionary spending.”
The forecast argues “this is just the beginning of Australia’s [economic] transition” and warns “there’s a hard road ahead”, particularly as the economy tries to absorb the shock of “a downturn in residential building as the capital city residential booms end and many markets move into oversupply”.
Residential commencements will fall by more than 25 per cent over the next three years, according to the report.
This is not the first time the research house and forecaster has foreshadowed price drops and tough times for residential property investors.
The group has consistently warned of apartment oversupply, and in July released its Residential Property Prospects 2016 to 2019 report which predicted that a combination of lower population growth and increased dwelling completions would see most undersupplied markets tip into oversupply in 2016 and 2017.
In September last year, Kim Hawtrey, associate director building forecasting, said we were already at the boom’s turning point.
“When you’re in a boom, you think it’s going to keep going on forever. Like Sunday afternoon, it’s a little bit seductive — but Monday morning is coming.
“The home building boom is peaking and we need to get ready for a tightening market. Headwinds are looming,” he said.
At the group’s Forecasting Conference also in September last year, Robert Mellor, managing director said there would be a four per cent decline in median house prices after the market peaks — which at the time he said would likely occur in the early part of 2017.
