We are already seeing cracks in the housing market in Australia. At Variant Perception we track news articles of things in oversupply, as this flags interesting investment themes. Normally, we’ve seen commodities in oversupply, but interestingly, Australian apartments are now regularly popping up on our screens. The number of apartments built in Australia has doubled over the last four years. The oversupply is starting to hurt. According to the Australian Financial Review, apartments in central Melbourne are being resold at up to 30 per cent less than their off-the-plan purchase price.
Beyond the number of units that are hitting the market, the value of financing has surged. Housing finance in Australia is up 65% in the last four years, but we’re now seeing it roll over from a very high level. We anticipate a much bigger fall in the level of housing finance as building approvals roll over.
Source: Bloomberg, Macrobond and Variant Perception