• John Lowry

Capital City New Dwellings Oversupplied - What Does It Mean for Construction Costs?



Another very useful insight from property guru Michael Matusic. In this research Michael compares dwelling commencements with population growth. whilst there are many other variables, it provides a good snapshot of the state of play in each State capital. Hobart is the only capital showing an under-supply of new housing. Brisbane's oversupply is moderate, but others are not only substantial, but climbing, except for Perth, which is falling steadily after a long period of overheated activity.

In Summary the current state of play is:

Oversupplied

  • Sydney 19% rising

  • Melbourne 7% rising

  • Brisbane 4% rising

  • Adelaide 45% rising

  • Perth 30% falling

  • Darwin 133% rising

  • Canberra 16% rising

Undersupplied

  • Hobart 30% rising

The full post is HERE >>

Comment:

The question for me is how will these numbers impact on new construction and construction costs. Will developers continue to build new housing in the face of falling demand (or at least stiffer competition), or will the residential construction sector slow down?

Playing into this is the political imperative for investors. Should Labor win the forthcoming election new construction may be the only avenue to tax-effect residential investment. Will that mean an increase in new residential or will falling and depressed house prices around the country, combined with an oversupply leading to more competition in rental returns, tend to dampen enthusiasm. After all, negative gearing ultimately relies on capital gain.

These statistics are consistent with my recent research into construction cost forecasts, focusing on industrial construction, where I conclude that construction cost increases will be modest. If the residential sector begins to slow this will put more downward pressure on construction costs over the next few years.

#building #constructioncost

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