Entering the property market for the first time can be daunting, especially if you’re unsure whether your ideal home will be available for sale. Recent analysis has suggested that Australian property is in short supply, but will this remain the case?
BIS Shrapnel’s Building in Australia 2015-2030 report doesn’t seem to think so, as it predicts that the market could in fact be oversupplied as early as 2018.
There are a number of reasons why BIS Shrapnel thinks this will soon be the case. Firstly, there’s the fact that low interest rates have spurred construction activity over recent months; the official cash rate has been at its all-time low of 2 per cent since May.
As a result, construction activity has received a much-needed boost, as companies feel more confident to invest in building more properties. The Housing Industry Association revealed that during the 12 months to March this year, 205,000 new dwellings were given the go ahead, making it the first time the 200,000 mark had been exceeded.
Net overseas migration (NOM) has also meant that Australia is under more pressure than ever to ensure that enough properties are available. Figures from the Australian Bureau of Statistics (ABS) show that in 2013-14, 212,700 extra people were added to the population as a result of NOM. In fact, by 30 June 2014, it is estimated that 28.1 per cent of the Australian population had been born overseas.
BIS Shrapnel has indicated that some parts of the country will be more affected by the oversupply problem than others. Concerns have been raised about the affordability of real estate in Sydney and Melbourne for some time now, and it seems this won’t change any time soon.
The ABS released its Residential Property Price Index for the March quarter, which revealed a 3.1 per cent rise in Sydney real estate values from the previous three-month period. Compared to 12 months earlier, property prices had risen 13.1 per cent.
Meanwhile, the group forecasts that Western Australia will witness the sharpest decline in building activity out of the five major states. This will be linked to the fall in mining and resources sector investment, which has already taken its toll on real estate in Perth.
Momentum in the national property market could soon be about to see a shift change, which is something first-time buyers will need to prepare themselves for.