CHART: The surge in Australian home building is outstripping population growth

Here’s another sign that house price growth in Australia is set to cool.

The economics team at Citi mapped the population growth against the dwelling stock, which has surged over recent years during the east coast construction boom. Here’s the chart:

Source: Citi

The analysts write:

Population growth picked up significantly during the mining boom and peaked in 2009. It took home-building the better part of a decade to respond to the faster population growth and construction now has overshot population growth and is likely to remain so (Figure 2). Since then population growth has slowed for both females and males for all age brackets except for the over 65s (Figure 3 and Figure 4). This would suggest the longer-term prospect for household formation and home-building could be moderated by the slowdown in population growth and the demographic shift to an older population.

But this is only part of the picture. They also note that for the Australian housing market, demand “is more than a function of population”. The raw force of easing demand for housing through slowing population growth is being compounded by tightening lending standards and an rising costs of investor loans. The Citi analysts add that “importantly, we don’t see the tightening in financial standards that’s driving slower demand growth, especially for interest only loans, as temporary.”

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