Australia's problem may not be a slumping property market but rather shortage of property inventory. According to Australia's oldest housing developer AV Jennings the residential sector in the country is in a housing crisis.
Surprisingly, according to Commercial Real Estate, AV Jennings said that the issue is rather long-term undersupply. And contrary to what is being feared by analysts that the home price growth would soon be stunted, the undersupply of properties might even drive home prices upward.
AV Jennings chief executive Peter Summers said, "You can see for the best part of 15 years, there has been a continuing undersupply of residential in Australia. You may recall that a couple of years ago, the then federal treasurer Joe Hockey actually made the comment that Australia has a housing crisis. That is absolutely true."
Furthermore, Summers believes that the undersupply of residential properties will keep demand strong for some time. According to Commercial Real Estate, local investors account only 29 percent of total sale of residential properties while foreign buyers are only at 1 percent. This could suggest that decrease in buying activities of foreign investors on residential properties, contrary to what was previously reported in Domain, may not have a substantial effect on the property prices as demand may still be strong from local buyers.
In a previous report, the Australian real estate market is expected to face challenges as the result of decline in property investment from overseas. At that time while Canberra, Melbourne and Hobart were the only major cities that have seen growth in home prices, the rest of the capitals saw either a decline or no movement in property values. The said decline in foreign buying activity threatens to lower prices even in the hot markets of the country in the future. It turns out that what the markets still have demand from local buyers as undersupply of housing is still a big challenge.