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salahanthropistation

bit of anectdootal evidence i think mate. new construction is actually down on averages and trending further down. a lot of pull forward demand from last 2 years and supply chain issues means numbers will be down from historic averages. this will make the rental crisis harder, expect vacancies to drop even further from current. could get crazy once immigration is ramped up. i expect some big 'new build' grants from gov coming soon.


TheEmpyreanian

Well, those cranes seem fairly fucking real. Definitely big build in the works without a doubt.


without_my_remorse

Excess construction is a feature of property crashes.


TheEmpyreanian

Fingers crossed! But if you're not considering fuckery, I'd say you're analysis may lack a touch of nuance. Two million extra immigrants for NSW according to Perottet's plan. While that's absolutely fucking insane to begin with, it's going to spike prices more than they already are.


without_my_remorse

Perotet has no control or input into immigration I’m sorry to tell you. It’s a bit like him lecturing the electorate on prophylactic’s- no one would give a shit.


TheEmpyreanian

Ah, state NSW most definitely does.


without_my_remorse

No one cares what the bloke says. He doesn’t have a say in the matter.


TheEmpyreanian

That's not...quite how these things work.


without_my_remorse

Ummmm yeah it is mate. Immigration isn’t determined by the NSW parliament. 🤣


TheEmpyreanian

Ah...you might not quite get how the whole lobbying thing works and how state and federal interlock.


without_my_remorse

Haha pretty sure I do mate. And unbeknownst to you, I actually have a very close mate who is an MLC..


TheEmpyreanian

Everyone does! Or contacts at the very least. But, friends in low places. The staffers is where the guts *really* spill out. Hopefully not quite like with that desk in APH...


limpcrayon

Low interest rates/easier lending conditions lead to increased new home builds, per /u/without_my_remorse's favourite model - [A model of the Australian Housing Market](https://www.rba.gov.au/publications/rdp/2019/pdf/rdp2019-01.pdf). But, the model assumes (and requires in order to be considered) 'business as usual' conditions, which the last few years have been anything but. Supply chain issues, delays in builds etc have all had an impact that the model does not accommodate for (and can be seen invalidating the models rent prediction vs real world). In order for this collapse to happen, there needs to be a shock/sudden surplus in new homes, but that's not happening right now due to the issues faced by builders, with many builds extending beyond 12-18 months (pre-covid they would be 4-6 month builds) they seem to be staggering through them as timeframes are currently dictated by trades availability and supply of product. This turnaround time also means more people are avoiding building new homes (and will drop even more with rate rises) instead preferring to pay premium for existing structures - driving the price up, but taking a 'new build' out of the equation. It's surreal seeing 10 year old homes sell for more than land + new construction value, but that's what has happened in this boom. The motivator for the sudden uptake in construction currently keeping builders busy was the home builder scheme thing they did at the start of covid. Every man and his dog signed up for builds/renos etc so it became almost impossible to find a builder who would take on work. Throw in supply issues, and you have a perfect storm of a massive backlog of houses not being built, followed by new home sales at their lowest in 20+ years once that 2020 cut-off date passed. A mate of mine only just started his reno, they signed with the builder late 2020, all other builders they spoke too weren't taking on any new work. If I was a betting man: * We would see the cooling off in people wanting to pay more than land + construction costs for existing structures * Small pullback with rate rise and FOMO dieing off but no significant crash because: * excessive build times for current homes reducing supply shock due to staggered completion times (builds are currently taking up to 200%+ longer than they did pre-covid) * excessive build times and supply issues driving up costs have put a lot of people off wanting to build new, instead preferring to buy existing, causing a drop in new build interest (New home sales have actually been in decline for the last 20 years, and we're near all time lows) - compound with a decline when rates rise. * both factors combined with the build duration would reduce excessive surplus hitting the market, and a subsequent scarcity afterwards, somewhat normalising the supply to market rather than the glut required for a 'crash'. Basically, the housing market might be 'saved' by supply chain issues causing increased build times.


TheEmpyreanian

Great rundown and I'll make a post about that supply chain in a tick. Thanks for posting that.


Clear-Context6604

A bit of a mix of all of the above I’d guess- Could it also partly be the lag time between execution of contracts etc and projects starting? There’s often years in between.


TheEmpyreanian

A very good point that I definitely should have added and thanks for pointing that out. Still, where possible, reduce complexity. What's going on? Fuckery. Same as always.


withcertainty

I'd say it's only early days. Much of the residential construction currently underway still reflects the financial initiatives offered to mitigate the (anticipated) covid-related downturn. In WA, take a walk around any neighbourhood and slabs that were poured months ago still have yet to see any additional work. There are also construction companies going broke. If there is going to be a 'collapse', surely these are some of the early signs.


TheEmpyreanian

Different in Sydney. Cranes fucking everywhere and a lot of big projects going on.


ben_rickert

Super cheap money - a bigger deal than realised for developers / speculators relying on bridge / mezzanine financing to fund deals I think there’s a big belief the immigration floodgates are going to be blown open post election. IMO that’ll support and likely boost certain inner / middle ring areas of Sydney and Melbourne and property types. I can’t see how outer suburban and regional doesn’t implode though. People aren’t going to flee Shanghai to move to Orange.


TheEmpyreanian

Only an absolute idiot would think opening the immigration floodgates is a good idea. It's going to cause more of the same problems only worse and much more quickly at the levels they're contemplating. I wouldn't be surprised if they make them move regional actually. Happened before.