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Category: Housing Industry / Economic Trends

Housing supply and demand in balance: Fitch

Wednesday, 30 Nov 2016 13:49:47 | Michael Janda

Fitch says the east coast apartment building boom has not yet pushed Australia into dwelling oversupply. (612 ABC Brisbane: Jessica Hinchliffe)

Australia is not building an excessive number of new homes, at least compared to the boom markets of Ireland and Spain before their housing busts, Fitch Ratings finds in a new analysis.

The global credit rating firm has crunched the numbers on how many new homes have been built compared to population growth across four countries - Australia, Ireland, Spain and Great Britain.

Ireland and Spain had catastrophic housing busts during the global financial crisis, with prices more than halving across large swathes of both countries as properties failed to sell, even leading to some new homes being demolished.

Fitch's comparison of construction rates to population growth highlights one reason why the property market collapse in these two countries was so severe.

While Australia does appear to currently be building more housing than it needs to match population growth, with 0.57 homes completed per extra person, it is nothing compared to Spain's peak of two new dwellings per extra person or Ireland's peak of one-for-one.

External Link: Tweet with Fitch Ratings graph on completions v population growth

Put another way, Australia is building enough new homes for each one to house 1.75 people, where the fairly long-term average household size has been 2.6.

In the June quarter, Australia completed the construction of a record 57,025 new homes, or 2.4 per 1,000 citizens.

"The increase has not reached levels seen in Ireland and Spain during their building booms, prior to the onset of the global financial crisis in 2008, when their ratios were up to 4 times the levels in Australia," Fitch analysts James Zanesi and Hai Duong Le wrote.

However, supporting an analysis undertaken by the ABC two years ago, Fitch has found that Australia is building far more dwellings relative to its population growth than the UK.

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