Housing oversupply hurting prices

Housing oversupply, tighter lending policies and investor crackdowns have led to a slowdown in house price growth across Australia, according to a new report.

Workers on the roof of a house under construction

A new report says oversupply in Australia's housing market means a reduction in price growth. (AAP)

Growth in Australia's house prices is expected to continue to decline with housing oversupply partly to blame, a new report says.

Tighter lending policies and crackdowns on investors have also contributed to the predicted declines in house price growth across the country, the latest BIS Oxford Economics Residential Property Prospects 2018 to 2021 report said.

New housing completions have seen markets tip into oversupply with the report, published on Monday, predicting the Australian market to have experienced four successive years of 200,000 plus new houses annually by the end of 2018/19.

BIS Oxford Economics senior manager Angie Zigomanis says supply is running at "record levels".

"Demand has also risen, with population growth expected to exceed 400,000 persons in 2017/18, its highest level since the peak in net overseas migration in 2008/09, although this will still not be sufficient to meet supply," Mr Zigomanis said.

As a result, there is a growing supply and demand imbalance which is contributing to weaker prices in 2018/19, the report says.

But, decreases in investor demand and a decline in new housing construction is expected to see a sharp decrease in supply from 2019/20.

The report also blames the restrictions placed on investors for slowing down all markets with the exception of Hobart over 2017/18 with further declines or flat prices predicted over 2018/19.

NSW and Victoria have been hit the hardest, Mr Zigomanis said.

"Where the strength of investor demand has been a key driver of the Sydney and Melbourne residential markets respectively, the decline in investor activity has impacted price growth," he said.

A rise in price growth across the nation is predicted from 2020/21 as supply falls back below demand and as economic conditions strengthen, the report says.

2 min read
Published 25 June 2018 at 12:04am
Source: AAP