Apartment construction could collapse

Adam Smith 1 August 2016

apartment constructionA “tsunami” of apartment supply will eventually see multi-unit construction collapse, an economic forecaster has predicted.

The Building in Australia 2016-2031 report by BIS Shrapnel has claimed multi-unit residential construction could fall by 50% by 2020. The forecaster said a boom in construction is set to “run out of steam” in the coming year.

“After recording strong growth during the past four years, we estimate that total dwelling starts reached an improbable 220,100 in 2015/16, an all-time high,” BIS Shrapnel associate director Kim Hawtrey said. “From this level, national activity is forecast to begin trending down over the following three years, with the high-flying apartments sector leading the way down.”

Hawtrey predicted all major markets would shift into oversupply, with the exception of New South Wales.

Low interest rates have unlocked significant pent-up demand and underpinned the current boom in activity, but with population growth slowing and a strong backlog of dwellings due for completion, new supply will outpace demand,” Hawtrey said.

While New South Wales is set to remain undersupplied “for some time yet”, Hawtrey predicted Sydney would also see a slowdown in home building in the coming 1-2 years.

BIS Shrapnel’s prediction echoes warnings from CoreLogic that the apartment market is headed for oversupply, potentially putting settlements at risk. BIS Shrapnel has previously predicted that oversupply will see house prices fall across all capital city markets by 2019.

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