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Bank of America- Merrill Lynch backs the next property cycle

Property Markets / Outlook


Feb 27 2018

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According to the Sydney Morning Herald, Bank of America-Merill Lynch say the influx is unlikely to prompt a crash in house prices, but rather fewer housing starts, laying the groundwork for undersupply over the next two years.

Concerns of over supply in Sydney, Melbourne and Brisbane have been raised after building approvals peaked in 2015, on the basis of a three-year construction period.

At the same time, house prices have moderated, rates have increased and construction costs risen.

But BAML economists say the abundance we’re seeing now will be long gone by 2020.

“With population growth expected to keep underlying housing demand robust, we see underlying demand outpacing supply in Australia’s largest housing markets, New South Wales, Victoria and Queensland from 2020,” economists Tony Morriss and Alexandra Veroude wrote in a recent research note.

"Our analysis supports our view that any oversupply now, with Brisbane of greatest concern, should not create large imbalances over an extended period and present as a risk to financial stability."

Property observers have also raised concerns about off-the-plan buyers following through with transactions.

But the BAML economists say they don’t expect settlement defaults to rise significantly, as the economic outlook strengthens and the labour market tightens. 



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