Speculation of rate rises here in Australia don't seem to be deterring eager Australian property buyers. Melbourne's clearance rate is currently sitting at 73% compared to 74% this time last year. And Sydney, Brisbane, Adelaide, and Canberra are sitting at 77%, 75%, 94% (WTF!), and 79% respectively.
Shane Oliver made mention in an article in last week's AFR that Melbourne's property market would bear the brunt of the decline in prices, thanks to an oversupply of stock that is yet to be absorbed. I don't disagree with Shane on this one.
In this week's chart, I have plotted Australia's Building Approvals in dark blue, Dwellings Under Construction in light blue, and Prices in red. As you can see, we have experienced three peaks in Building Approvals since 1995 - in 2002, 2010, an 2021. Typically we see prices peak soon after Dwellings Under Construction peaks. What follows then is the commencement of construction, which then peaks, and then we start to see the cycle turn. Approvals fall, prices fall, or maybe the other way around, and construction falls.
Bottoms are less pronounced that the tops, and for this reason, I think it's super hard to pick the bottom of these things. I'm not saying the tops are easy to pick, clearly with the benefit of hindsight all of this is easy to spot.
Right now, we have seen Building Approvals peak. My guess is that prices have or are near their peak. You can already start to see the red line turn. My guess is we'll see prices cool a little, and we'll be back through the cycle again.
My colleague Matt Rigby and I talk more about this in last week's The Wide Lens podcast. I've shared the exact chapter where we discuss this below.
You can also listen to the podcast on Spotify or wherever else you listen to your podcasts.