A “dramatic” decline in residential building has created market conditions similar to those post-GFC, which could result in another price boom.
Chief Forecaster for the Australian Construction Industry Forum Kerry Barwise says apartment building has slumped far greater than expected across the country, with house building also falling.
“For the March Quarter new apartment starts fell 41% on the same time last year,” he says. “That is a dramatic fall. Those quarter-on-quarter figures can be volatile but that is far deeper than the 10-15% drop that was expected for 2019. House starts are also falling, but not as much, losing 8.6% over the same period. The entire residential building market is contracting.”
This means there will not be an oversupply of apartments, as previously predicted. It could mean that as the market picks up again, increased competition for less stock could lead to significant price increases.
The current market signs are very similar to conditions after the Global Financial Crisis and Sydney could be the worst hit again by rising prices, according to Chief Economist for REA Group Nerida Conisbee.