Fears of Oversupply and Falling House Prices in Australia

26 August 2011

Australia is one of the few countries in the world that survived the global recession relatively unscathed, but now there are new fears that the property market here is oversupplied and that house prices will fall. The country is rich in resources, and heavy demand from China and other expanding economies has increased profits, but the Australian Dollar at a 30 year high against its US counterpart is putting a strain on manufacturing and exports companies. There are fears this could affect the number of foreign investors. The central bank has already downgraded its growth forecast for 2011 from 3.25% down to 2% , and the percentage of people making late mortgage payments has increased.


The average price of property in Australia has increased by 150% during the last decade, which is largely due to immigration, lack of new construction and the demand from Asia for commodities. Construction has now caught up, and the number of new homes being built has increased by 10% since 2006, although in the state of Victoria it has increased by 40%. This has led to worries that Melbourne is oversupplied, and prices in Melbourne have fallen by 3.9% this year to an average AU$485,000. Prices have also fallen in Perth and are down 2.4% to an average of AU$461,000, although prices in Sydney remain largely unchanged so far.


Much of the new accommodation being built in Melbourne is in anticipation of thousands of skilled migrants coming to seek work in the booming mining industry, which is home to Rio Tinto and BHP Biliton, while much of the new construction in Perth is due to the fact that it lies on huge natural gas and iron ore fields.

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