Property Downturn | The Researcher

Australian Housing Market undergoing natural correction

Whilst the Australian housing market weathers the storm of the current downturn, economists point out the historical data shows we are in the midst of the highest low on record. 

The Australian housing marketing downturn, particularly in Sydney and Melbourne is forcing builders to cover costs and workers to get creative as jobs become more scarce. However, in a report by ABC News over the weekend Master Builders Association chief economist Shane Garrett highlighted that the downturn is likely to still be the highest low in history. The construction industry is now seeing some of the overflow of a correcting market after an inflated bubble saw Sydney and Melbourne reach unprecedented highs by 2017.

Tighter regulations on lending have been one of a number of factors  in a bid to avoid an uncontrolled recession similar to the impact of the GFC a decade ago. With national house prices down 6.8 percent Mr Garrett put the increased risk in entering the current market especially in Sydney and Melbourne as part of the reason for the construction wind down, “It’s a riskier predicament for all concerned” he said.

Whilst the honeymoon period is over for the time being the current climate is a natural reaction to the 2016 peak of 230,000 new homes built. Mr Garrett said that a forecasted floor of 175,000 meant the predicted low will be the highest ever low point for new home building on record. 

The Good News

Everything that goes up must come down, but thanks to an early adjustment with tighter lending it is likely we will be able to avoid a full blown crash and as the construction industry rides the falling tide the sun as always with shine on the other side

Some positives that give the housing markets hope are tightening residential vacancy rates, an underlying demand that is still strong hindered only by consumer sentiment and tight credit and low interest rates likely to fall further. Australia has a very strong infrastructure investment pipeline combined with a growing population, therefore fears of a full-blown recession don’t seem to be taking all factors into account.

Australians will be eagerly following the market over the next few months but we don’t believe the data aligns with more devastating downturns of the past.