The construction of apartments across Australia is expected to halve in the coming three years after the market saw a record building boom.
According to BIS Oxford Economics’ Building in Australia 2017- 2032 report, high-density apartment development will witness the largest decrease. All home building is also expected to decline.
The 31 per cent fall in residential building will not fight back the long-expected over supply. The market will still have an oversupply of 31,100 homes by next year, which may result in a drop in apartment prices, BIS Oxford Economics managing director Robert Mellor says.
“The mistake people made was they thought high population growth was driving really high demand… but they overdid it and kept building and oversupplied the markets,” Mr Mellor added.
“There will be some price declines,” he added. Although an overall shortage of homes, the oversupply in specific suburbs may lead up to 4 per cent price fall in Melbourne and Sydney market. Continued price falls was also likely to take place in Brisbane.
The slowdown in building activity across the nation is expected to reflect the downturns in the mid-1990s and after the introduction of GST in 2000/01. However, the buliding commencements would still be higher than in the previous depression due to the increased interest rate.
Industry experts suggested the decline in construction activity is a typical downturn in the cycle, Housing Industry Association senior economist Shane Garrett said.
“Going from peak to trough is pretty standard.” he added. “Our forecasts have the market bottoming in 2019 at 175,400, they have it at at about 160,000.”
“Even those bottom-end points are very elevated by any standard, when you look back at levels over the last four decades.”
The dwelling completions will go faster than the underlying demand until 2020 and the Australian market is then expected to return to a housing deficiency, the BIS Oxford Economics report expects.