The vagaries of the property market are never more perplexing than when the media is full of property news that seems contradictory.
This month we’ve had CoreLogic stating that the property market has stabilised in the last quarter, with values rising in Sydney, Melbourne, Brisbane, Hobart and Darwin (though there have been drops in Adelaide, Perth and Canberra).
Yet at the same time, the lending approvals for new buildings have fallen to their lowest level in five years. June’s figures were 1.3% lower than May’s and down 20% on 2018 approvals.
If the market is stabilising but fewer new homes are being built, what does that mean? As always, it’s down to demand and supply and the factors in population growth and the economy that influence those contrasting pressures.
The easing of lending restrictions and the continued growth in Australia’s population generally means there will be high demand for residential properties.
Demands: Apartments vs. Houses
At present, a lot of that demand is being met by apartments rather than houses, as apartments are less expensive for the entry-level home owners and investors. New home sales rose 0.8% in the second quarter of 2019 – the first quarterly rise since the end of 2017 (even as building approvals fall)
Supply, however, looks like it will be declining for a while. With fewer new-build loans being approved, by the time those new dwellings are constructed, demand is likely to considerably outstrip supply, and price growth will be the inevitable result.
Of course, circumstances change and factors such as the growing population, strong employment figures and access to finance will have an impact on the demand vs supply equation. It pays to keep a close eye on the changing fortunes of the market.
On the current trends, however, it’s likely that the next 12-18 months will see demand outstrip new housing supply and that the news looks very good for the housing market over the 18 month to 3 year period.