RBA official fears for Brisbane apartment prices
Sydney’s apartment boom has been more evenly spread than Brisbane and Melbourne, and fears that oversupply will cause a fall in prices are overblown, says a senior Reserve Bank official.
RBA’s assistant governor of economics, Luci Ellis, noted that while growth in the building of new Australian homes had been outpacing population growth, Sydney was not expected to suffer a big price fall.
Brisbane was the real risk, Dr Ellis said.
"It's a truism that the more supply you have, the weaker prices are going to be relative to what would have happened if supply had been lower," Dr Ellis told a lunch of the Women In Economics Network and the Australian Business Economists in Sydney on Wednesday.
"But, at this stage, we're not seeing that ... that supply, in and of itself, is going to create a big fall in prices and certainly not in Sydney."
Instead, Dr Ellis singled out Brisbane, pointing to the high geographic clustering of the new developments set to hit the market this year.
"This year is crunch time" for Brisbane, she said.
"Over the years, we've pointed more to Melbourne and to Brisbane as where that's more likely to cause trouble in terms of concentrated increases in supply resulting in lower prices and therefore potentially distress,” Fairfax Media quoted Dr Ellis as saying.
Sydney was a different story though, she said.
“Whereas, in Sydney, it's sort of all over the city, so it's much more evenly spread and so less likely to create a really concentrated local price effect."
And while new construction was running ahead of population demand, that was unlikely to last as a “point of peak” for building approvals had been reached.
“Building approvals have stepped down to a new level. The backlog of work in residential property is now starting to decline, even in NSW and Victoria, but particularly in Queensland,” she said.
"So in some sense, this is a phase that will eventually end and we won't be building more than the population requires."
On the demand side, Dr Ellis said Melbourne's surprisingly strong population growth gave strong cause for belief that prices would not fall there.
"Similarly, population growth remains fairly strong in Sydney, so it's not clear to me that we end up with a serious problem here."
Home price figures released by the Bureau of Statistics on Tuesday showed Australian home prices rose 10.3 per cent last financial year and 13.8 per cent in Sydney and Melbourne. But price growth has slowed in Sydney, with just 2.3 per cent increase in the final quarter.
According to a CommSec analysis of the Bureau's data, the median price of houses transacted in Sydney in the June quarter was $1.02 million, $110,000 more than a year ago.
