Yesterday I looked at the latest AFG data to get some idea of where the demand side of the housing market it headed in the short term. In timely fashion, now SQM Research have released their updated stock on market figures to give us a grasp of the state of the supply side.
Firstly, at the national level we still seem to be seeing a growth in the number of houses for sale, we are not quite at GFC highs but we are definitely on the way:
It should be noted however, that the national figures don’t truly represent just how very different each state market is performing on the supply side.
Sydney is still seeing some growth in supply which suggest that it will continue to follow its trend into slow deflation territory as there isn’t much in the credit statistics to show that demand has picked up yet. Obviously this week’s 0.25% rate cut may help there:
Next Melbourne … Umm … What to say?
This is now a big concern. There is nothing in the credit data to suggest that we are going see the magnitude of demand required to offset this supply side surge, and it will be well known to Melbournians that there is a large amount of new stock yet to enter the market (the peak in building approvals was only a year ago and they remain elevated). Unless there is some slowdown in supply, Melbourne is heading for a bust.
People with an interest in other markets may not be too concerned but it must be remembered that Melbourne is a very large market, it is therefore possible that any problems in Melbourne will lead to contagion. The last thing Australia needs at a time of global instability is for one of its major city’s housing markets to send tremors through the financial system.
To Brisbane:
That looks to me like a stall in the upward trend and it would therefore appear that Brisbane is stabilising on the supply side, but the stock level is still high. It should be noted, however, that the credit demand in Queensland appears to be continuing to weaken which will offset this stall somewhat. It is hard to tell exactly what will occur in this market, but in my opinion the “slow melt” still looks like the most likely outcome. Obviously the latest rate cut could spur some new credit demand and change my mind.
Finally Perth… and what actually looks like a reversing trend:
Again it must be noted that this is being offset by the low demand for credit in Western Australia, however compared to Melbourne is looks down-right super.