Oversupply on the horizon

By Staff Reporter

The residential building boom and slowing population growth could result in a housing oversupply by 2018, one industry forecaster says.

A building report by BIS Shrapnel states that the undersupply of houses sits at 80,000 nationwide, but record-low interest rates have created a construction boom that will see supply overtake demand by 2018.

BIS Shrapnel associate director Kim Hawtrey said new dwelling starts reached an all-time high in 2014/2015 at just over 210,000.

“Low interest rates have unlocked significant pent-up demand and underpinned the current boom in activity, but as population growth slows while construction activity remains strong, new supply will begin to outpace demand,” Dr Hawtrey said.

“This will see the national deficiency of dwellings gradually eroded and some key markets will begin to display signs of oversupply.”

BIS Shrapnel forecasts that net immigration will continue trending downwards in response to softer employment and economic growth and building activity will begin to fall in 2015/2016 as pressure is alleviated in some markets.

It predicts Western Australia will experience the sharpest decline in building activity at -13 per cent as the economy slows following the mining boom and population growth softens sharply.

Victoria has been over-building relative to demand and is expected to show -7 per cent growth in building activity, with some areas of Melbourne shifting to a state of oversupply as early as 2015/2016.

Queensland activity is forecast to remain flat at a strong level as its market moves towards balance, while New South Wales is expected to maintain positive growth in response to its persistent dwelling deficiency.

Oversupply on the horizon
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