Could the Australian property market be in trouble?
The US investment bank Morgan Stanley maintains that Australia’s housing boom has peaked. The bank cites a drop in immigration levels, tighter controls by banks and “frothy” prices as reasons for the slowdown, all of which have intensified the risk of a recession.
Alarm bells have been ringing for much of the past year, and Morgan Stanley is among a growing number of investment banks to have shown concern over rocketing property prices in the country. There is also growing unease with regard to the home-building boom that Australia is experiencing, which prompted Nigel Stapledon, the head of real estate research at the University of New South Wales, to comment that there is a “tsunami of home supply” coming.
He raises a good point. It’s been estimated that, as things stand, cities such as Melbourne already have an oversupply of dwellings, particularly inner-city apartments. Despite this, property developers are still building. Brisbane is in a similar position and it’s been noted that this city too, already has an oversupply. It appears Sydney is on slightly stronger ground, but even here, where there is a massive demand, it’s been estimated that there will be an oversupply of apartments from this year onwards.
Although bankers may be getting a little twitchy, a survey conducted late last year by the New South Wales division of the Australian Property Institute found that people – including fund managers, financiers and property analysts – believed that the surge in prices would continue. Interestingly 44% thought that prices in Sydney would continue to grow for the next six months, while 33% expected the trend to continue for at least another year.
The picture was a little darker for the Melbourne market, where only half of those polled expected the increase in prices to continue for another six months. A mere 6% of the respondents believed that the boom in Sydney and Melbourne would run for another two years.
Words: Lea Jacobs