Australia Apartment Oversupply Greater Problem than USA had in 2007 property market collapse, it took five years before real estate prices began recovering

Australia Apartment Oversupply Greater Problem than USA 2007

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Reported in the Sydney morning Herald: ”It looks like Australia has a greater oversupply problem than the US did in 2007," says Mr Montgomery in a note to clients. "And after their property market collapse, it took five years before property prices began recovering."

Breaking down what will be constructed and what will be required, Mr Montgomery is left with an oversupply of 200,000 dwellings by the end of 2016.


"The volume of new apartments is now approaching, and even exceeding, the average number of apartment sales overall in the past five years," reads the CoreLogic report.


Date: May 15, 2016
Published by: Sydney Morning Herald
Reporter: Jessica Sier
Category: Australian Real Estate
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Roger Montgomery sees apartment oversupply sending property prices south

"It looks like Australia has a greater oversupply problem than the US did in 2007," says Mr Montgomery in a note to clients. "And after their property market collapse, it took five years before property prices began recovering."


Click here to view the original Sydney Morning Herald article

Mr Montgomery points to data from the Australian Bureau of Statistics which uses household formation as a proxy for demand and construction as an indicator of supply. A housing report from last year, says the number of households in Australia is projected to increase from 8.4 million in 2011 to between 12.6 and 12.7 million in 2036.


Breaking down what will be constructed and what will be required, Mr Montgomery is left with an oversupply of 200,000 dwellings by the end of 2016.
"At the current rate of household formation, that oversupply could be soaked up in about 18 months, provided construction of new dwellings ceased completely," says Mr Montgomery. "But of course construction will continue and the oversupply will take longer to be absorbed.”

"The volume of new apartments is now approaching, and even exceeding, the average number of apartment sales overall in the past five years," reads the CoreLogic report. Prior to the collapse of the US housing bubble in 2007, the construction of houses rocketed to record levels, in a bid to keep up with the frenzied demand of buyers.