Construction of new apartment building have slid down in Australia, just like the number of construction for new homes. As previously reported, markets like Sydney and Melbourne enjoyed boom in real estate in 2015. However, as the 2016 kicked in, the market has begun to show signs of slowing down. The signs were still subtle as many homeowners still think that their properties are worth more than they currently are. However, if the number of new housing or apartment development continue to dwindle as demand wanes that mentality could soon change.
According to the latest report on Commercial Real Estate, there has been a sharp decline in the number of new apartment construction. As of January 2016, this is the second straight month that new building work is down. The apartment sector used to be the fastest growing in the residential real estate segment during the housing boom. However, this and the decline in new home construction especially in markets like Perth, are growing signs that the real estate boom has come to an end.
At the start of the year, the housing market sector has seen fewer approved new construction than 2014 or 2015. Ai Group policy head Peter Burn pitches in saying, "Over recent months the construction sector became increasingly dependent on the continuing strength of residential construction and particularly apartment building. The drop in apartment activity, together with the decline in new orders across all four construction sub-sectors, suggests that construction may not play the leading role in rebalancing the broader economy that it played in 2015."
The number of new developments for detached housing units is the only one that has positively moved on the charts but the growth is still minimal if compared to the previous year. Concurrently the commercial real estate sector cannot deny that there is also a decline in building activity as the sector's latest activity sub-index fell 3.5 points to 36.5 in January, according to Commercial Real Estate. Could this be another undeniable effect of declining oil prices?
If it is, the effects of the waning oil prices on real estate can actually be felt everywhere. According to an earlier CBC report, the negative effects of cheap oil is manifested through the increasing vacancy rates and luxury condo owners to drop prices on the other side of the world. Sadly in Canada, even with reduced prices, there seems to be no takers. So why would builders continue to add supply of housing units if no one wants to move in?
