Housing Industry Association (HIA) Principal Economist Tim Reardon’s statement at the HIA Industry Outlook event in Canberra on Wednesday made clear that the Australia’s home market was firmly split between two opposing forces at this point in time.
Speaking before the attendees, Reardon said that the supply of homes was easing affordability in the market. However, this glut of properties, alongside the lower prices, were also hurting the demand for new homes to be built.
He shared that, for most of this century, there had been restraints on new home building that limited supply and forced prices upward. This changed in 2014, when the country began to build “unprecedented volume” of new homes, and now, the market is reaping the positive outcome in the guise of affordability indicators.
Examining the declines in home prices in Sydney and Melbourne, for instance, one could infer improved affordability – however, the June quarter’s results will more clearly outline the trend.
“The stalling of rental price inflation in the June quarter this year is the most important indicator as it tells us that the pent-up demand for new housing in Sydney and Melbourne is beginning to be met with a record volume of new housing,” noted Reardon.
Given the falls in prices, Reardon warned that there will be weaker demand moving forward, and that the housing market will cool in the near future.
“The fall in house prices will dampen demand for new housing over the next 12 months. Add to this, the proliferation of punitive taxes on investors in the housing market, disincentives to overseas buyers and tighter oversight of mortgage lending for home purchases and the environment for residential building is facing significant challenges. “
That said, the downturn in certain segments of the market and locations is expected to be moderate.
In fact, detached house starts in March 2018 were the most robust quarterly result in 18 years. Reardon, meanwhile, held on to the upcoming reports, saying that “leading indicators suggest that we should expect another strong result for the June 2018 quarter. On this basis, it now looks like we will round out the 2017/18 year with over 120,000 detached house starts. This would be the strongest four quarter performance for the sector since the mid-1990s.”
It was then identified that the market for apartments in metropolitan areas will be the most significantly affected by the improvement in affordability and by the regulatory imposts.
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