‘History doesn’t repeat itself, but it often rhymes’ – Mark Twain*
Unfortunately, we live in a time when our attention span would be lucky to exceed 140 characters. This leaves little opportunity to take heed of the lessons of the past.
If I had a dollar for every time I was asked for my thoughts on supply in our property markets, I’d have around $150. By no means life changing, but enough to fund a decent night out. Let’s go back a few decades and have a look at how supply has trended over time. The figure below tracks the growth in the number of dwelling commencements (measured quarterly) in Victoria and Queensland between September 1980 and December 2015. What is immediately evident is the tendency for supply peaks to arrive every four or five years, followed by notable periods of retraction. Indeed, Twain was certainly on the right track when he reflected on the rhythm of history.
Source ABS 8752.0 Building Activity, Australia
Looking toward the right of the figure, you can see that supply growth in these two markets remains below its previous cyclical peaks, with growth in commencements declining over the past two quarters. This has been largely driven by increasingly stringent development finance conditions and a retraction in foreign investment.
If you believe all the doom and gloom currently being peddled by the media on capital city oversupply, then surely the peaks you see above must’ve resulted in market crashes of apocalyptic proportions? Only that didn’t happen. The Australian property market has a long history of steady performance; a resilience underpinned by strong population growth and a diversifying economy (click here for more detail).
*In the interests of accuracy, attribution to Twain cannot be given with certainty, though the quote was too good not to use!