Before anyone gets too carried away with rebound in the residential housing market, Mason Stevens has noted the uptick in housing loan approvals has not resulted in a similar increase in residential building approvals.
The company said this would suggest that the oversupply in housing that occurred in the last few years, particularly with respect to apartments, was being soaked up by buyers rather than new housing being built.
Noting recent news suggesting the housing market was staging a recovery, Mason Stevens suggested there were some caveats that needed to accompany the data.
“In correlation to the housing price uptick, unsurprisingly, total dollar value housing loan approvals have recorded similar increases. Both the increases in prices and loan approvals shows that monetary policy continues to fuel housing demand and with rates envisaged to remain low for a long time to come, it is difficult to see the recent uptick as just a dead cat bounce (and perhaps a short to medium term floor has been found),” it said.
“Ignoring those sources that have a vested interest, non-biased commentators suggest we may be about to experience a period of stabilisation. Backing up that theory, with wage growth low and forecasts for slowing economic activity globally, it is hard to imagine a return to the boom times,” the Mason Stephens analysis said.
“Nonetheless, Australia continues with a high migration policy and the stats indicate a large component of housing demand stems from foreign investors and migrants. Australia (and particularly the major capital cities) have lofty targets for population growth, which also supports the stabilisation theory.”
It said any notable positive moves in the number of building approvals might provide the best indication that any sort of sustained recovery would eventuate.