Concerns have been raised by BIS Shrapnel's MD around the generalisation that Australia has a severe undersupply of residential property. While the affordability issues we see support that notion, the concern is the volume of new property that has come out of the current boom means we have gone beyond any undersupply in some states and cities, particularly with the slow down in the resources sector impacting some regions.
I also like their analogy below of the allure of the property boom period being likened to a Sunday afternoon and how it is hard to think about Monday coming.
By the time the boom feeling has become the norm and everyone is getting into the party, smart investors are thinking about what Monday morning will bring and preparing for that before the lazy Sunday afternoon is over.
BIS Shrapnel managing director Robert Mellor has warned that certain cities are looking likely to be in oversupply in the mid-term. “One of the dangers is there’s been an understanding Australia is massively undersupplied,” he said. “The impression is given that it's the same across most markets. That’s not the case. In fact you could argue in terms of the number of states and cities, more markets will be in oversupply in the next 18 months to two years than in under supply." Similarly, BIS Shrapnel’s associate director Dr Kim Hawtrey said he believes the home building boom in Australia is peaking. “Booms are mesmerisingly, hypnotically, trance-inducingly, spellbindingly seductive. And when you’re in a boom, you think it’s going to keep on going forever. Like Sunday afternoon, it’s a little bit seductive – but Monday morning is coming,” he said.