How much excess housing supply really exists?

Contrary to what most commentators say about the new housing market, almost all locales have an excess of new housing supply when compared to underlying demand.   30155398 - suburban houses seen from high vantage point

This is how residential building markets work – projects are approved, they sell, more often than not, off-plan and start construction.  

There is always a stock overhang. 

The extent of the overhang is what matters. 

 Our new supply count is based on commencements, not approvals, and also factors in those dwellings likely to be unoccupied (locked-up) or not used for permanent residents (i.e. hotels and other short-term accommodation). 

Here is another table from our Capital Cities Market Outlook Report. 

It outlines the current state of play regarding new housing demand and supply.

Stock overhang

Our benchmarks here are: 

  • Under a twelve month supply – tight, much more new construction needed – new dwelling values/rents should rise. 

  • Between twelve and 24 months – healthy balance, more construction needed – some increase in new values or rents.
  • Between 24 and 36 months – slightly oversupplied, little new construction expected – usually no change in new dwelling values or rents.
  • Between 36 and 48 months – oversupplied, no new construction warranted at that time, some projects don’t proceed – new dwelling values and rents often fall.
  • Over 48 months – very oversupplied, few new proposals proceed – falling values and rents. 

from Property UpdateProperty Update http://propertyupdate.com.au/how-much-excess-housing-supply-really-exists/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s