Housing approvals lowest since 2001...

From yesterdays news:

"Figures from the Bureau of Statistics show the number of dwellings approved for construction by local councils plunged by 8 per cent in August after an equal fall in July.

The cumulative drop in July and August leaves approvals at the lowest level since the GST-induced slump of early 2001. The Housing Industry Association is warning of worse to come, predicting a 5 per cent fall over the next 12 months."

I'm interested to know what this means for the future of the market. My initial thoughts are: reduced supply will lead to increase in price (all else being equal).

Your thoughts?

Mark Leo

 

That reduced supply was as a result of reduced demand I imagine.

It will also have a flow on effect to construction and other sectors.

I think it indicates a slowing of the market (obviously) and also the sentiment of the market.

 

Yes I guess that's right.....real chicken and egg stuff. Any other ideas anyone?

Mark Leo

 

The egg came first

 

Thanks Simon and Steve,
I'm hearing what you are saying about property market sentiment Simon ie fewer housing approvals=dim outlook for property demand. However, given that rental yields are increasing (increased demand/value) and interest rates are likely to remain steady (I believe the next move will actually be down if wages growth and therefore inflation doesn't blow out) are we heading towards a possible UNDERSUPPLY in the housing market?......and what affect will this have on price?
Mark Leo.

 

No, the dinosaur I think.

 

Hi Mark,

Reduced supply will definitely mean increased prices . . . but there is a big lag in time before this happens.

Generally there is an oversupply leading up to the peak and this oversupply needs first to be disipated before a supply shortage occurs . . . could take some years.

Similar result in the Gold Coast after the peak of the late 1980's . . . and it took a decade before the drop off in approvals translated into a short supply of property.

regards,
Steve

PS: Yes Dinosaurs lay eggs; chickens don't

 

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Hiya Mark,

1. Know first who is speaking and why are they making such a public statement. HIA? What's its interests and its present statement made? Can you see the "CONNECTION" factor?

2. It's on the "News" right? "Sensational" for its audience and for improving its own readership/viewership/listiening rate purposes rather than being accurate and telling the truth to the public, isn't it?

3. Just 2 of my own thoughts to share with you, please.

4. Thank you.

regards,
Kenneth KOH