By Eleanore D. Sanchez

A housing downturn could be looming in the horizon, with pockets of surplus supply emerging from the Australian construction boom, an asset manager warned.

Altair Asset Management chief economist Stephen Roberts said that the boom, specifically in the south-eastern states, could mark the onset of a market glut.

“Extension of the home unit building boom implies that home building activity may contribute positively to economic growth through to early-2017, but there is also a growing risk in our view that the price of this extension is increasing over-supply in pockets of the housing market and a more pronounced and extended housing downturn from mid-2017 and through 2018 detracting from growth and possibly increasing the risk of recession,” Roberts observed.

Australian Bureau of Statistics (ABS) data showed that approvals to build multi-occupancy housing units fell for two consecutive months in May and June by 8% and 5%, respectively, but picked up by 23% in June. Roberts describes this trend as “volatile.”

“Very near-term the impact of the latest RBA rate cut in early August and possibly another later this year could prompt even more late-cycle housing demand and supply but that looks to us like the final straw for the housing boom,” the economist concluded.
 
 

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