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Record low dwelling commencements to push prices even higher
Record low dwelling commencements to push prices even higher

New data out in relation to dwelling commencements makes for pretty dire reading. In fact, commencements have fallen a massive 15% in the year to December 2023.

Add to that significant population growth and issues in the construction sector and you have a perfect storm of conditions to drive property prices even higher.

What does this mean for property investors? Find out in this update from our own Kate Hill.

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Hello, everyone out there. How are you all doing?

I’m Kate Hill bringing you the best unbiased and honest content on property along with the best hints and tips.

So stay tuned today so that I can tell you all about why record low construction levels will push property prices even higher.

So the latest dwelling commencement datasets make for pretty woeful reading for anyone waiting and watching for property prices to hopefully fall.

While trying to time the market is never really a sensible thing to try and do to be fair, all of the major indicators point to a period of prolonged upward price pressure because of this serious demand and supply imbalance.

So just consider that the trend number of new dwelling commencements has fallen a massive fifteen percent over the year to December twenty three.

Plus, the quarterly number of housing starts at just thirty seven thousand is the lowest recorded for years according to the Australian Bureau of Statistics.

In fact, the ABS building activity dataset only goes back to December the December quarter two thousand and fifteen.

But compared to that period, dwelling commencements have fallen a massive fifty nine percent. And don’t even get me started on how much our national population has grown in that same period.

So, actually, it is more than three million people.

So how did all this happen? Well, I’m glad you asked me that.

As I’ve written and spoken about before many times, there has been a plethora of poor policy decisions at state and federal levels that have, fiddled with the equilibrium of real estate supply and demand.

We’ve seen levers pulled and pushed to discourage or encourage construction activity depending on a variety of economic factors at the time.

You really only need to think of the home builder scheme, which was announced at

the start of the pandemic for a recent example of what I’m talking about here, which you can also see in action in the graph, hopefully, that you’ll see here, which is from the ABS.

Fundamentally, there are a number of issues currently dragging dragging down building activity, which unfortunately is not going to get remedied anytime soon.

Building approvals have hit a decade low indicating a significant slowdown in new construction projects.

So this shortfall in approvals directly translates to a reduced number of completed dwellings obviously that exacerbates the housing shortage.

Rising construction costs, as reported by the National Australia Bank, pose a major obstacle to new housing developments.

Higher costs deter developers from initiating new projects which further limits the supply of available homes.

Lengthy approval processes delay the starts of construction projects which prolongs the time it takes for new dwellings to actually become available in the market.

So these delays contribute to the overall shortage of housing stock.

There are disparities in housing supply between metro areas and regional areas.

These persist as, again, illustrated by data from the New South Wales Department of Planning.

This imbalance exacerbates housing shortages in high demand regions while underutilising housing potentials in others.

So to put it simply, when there is not enough new dwelling stock supply available the price of existing stock is pushed even higher.

And we are in a sustained period where there is more demand than supply of properties for sale, which is why we are seeing prices rise in hundreds of locations around the country.

So this doesn’t mean that there aren’t solid investment prospects out there, of course, especially because we have a holistic national view when it comes to identifying the really the best areas for property investments for our clients, for example.

What it does mean is that those prospective property investors sitting on the fence or even existing investors debating about whether to add to their portfolios, you’re gonna be faced with higher prices when you do finally decide to take action.

As always, I will keep you posted on all things property from around Australia.

Don’t forget to hit the like and subscribe button if you are enjoying all this fabulous free content, and I will see you all really soon. Bye.

Hello, everyone out there. How are you all doing?

I’m Kate Hill bringing you the best unbiased and honest content on property along with the best hints and tips.

So stay tuned today so that I can tell you all about why record low construction levels will push property prices even higher.

So the latest dwelling commencement datasets make for pretty woeful reading for anyone waiting and watching for property prices to hopefully fall.

While trying to time the market is never really a sensible thing to try and do to be fair, all of the major indicators point to a period of prolonged upward price pressure because of this serious demand and supply imbalance.

So just consider that the trend number of new dwelling commencements has fallen a massive fifteen percent over the year to December twenty three.

Plus, the quarterly number of housing starts at just thirty seven thousand is the lowest recorded for years according to the Australian Bureau of Statistics.

In fact, the ABS building activity dataset only goes back to December the December quarter two thousand and fifteen.

But compared to that period, dwelling commencements have fallen a massive fifty nine percent. And don’t even get me started on how much our national population has grown in that same period.

So, actually, it is more than three million people.

So how did all this happen? Well, I’m glad you asked me that.

As I’ve written and spoken about before many times, there has been a plethora of poor policy decisions at state and federal levels that have, fiddled with the equilibrium of real estate supply and demand.

We’ve seen levers pulled and pushed to discourage or encourage construction activity depending on a variety of economic factors at the time.

You really only need to think of the home builder scheme, which was announced at

the start of the pandemic for a recent example of what I’m talking about here, which you can also see in action in the graph, hopefully, that you’ll see here, which is from the ABS.

Fundamentally, there are a number of issues currently dragging dragging down building activity, which unfortunately is not going to get remedied anytime soon.

Building approvals have hit a decade low indicating a significant slowdown in new construction projects.

So this shortfall in approvals directly translates to a reduced number of completed dwellings obviously that exacerbates the housing shortage.

Rising construction costs, as reported by the National Australia Bank, pose a major obstacle to new housing developments.

Higher costs deter developers from initiating new projects which further limits the supply of available homes.

Lengthy approval processes delay the starts of construction projects which prolongs the time it takes for new dwellings to actually become available in the market.

So these delays contribute to the overall shortage of housing stock.

There are disparities in housing supply between metro areas and regional areas.

These persist as, again, illustrated by data from the New South Wales Department of Planning.

This imbalance exacerbates housing shortages in high demand regions while underutilising housing potentials in others.

So to put it simply, when there is not enough new dwelling stock supply available the price of existing stock is pushed even higher.

And we are in a sustained period where there is more demand than supply of properties for sale, which is why we are seeing prices rise in hundreds of locations around the country.

So this doesn’t mean that there aren’t solid investment prospects out there, of course, especially because we have a holistic national view when it comes to identifying the really the best areas for property investments for our clients, for example.

What it does mean is that those prospective property investors sitting on the fence or even existing investors debating about whether to add to their portfolios, you’re gonna be faced with higher prices when you do finally decide to take action.

As always, I will keep you posted on all things property from around Australia.

Don’t forget to hit the like and subscribe button if you are enjoying all this fabulous free content, and I will see you all really soon. Bye.

Bye.

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