Toohey, head of macro-research in Australia, added that the surge in housing activity will face a challenge that will need to “normalise interest rates” as demand is weakening.
The latest Goldman Sachs report also warned of a slow growth in Australia’s population, where by 2017, there will be 530,000 less people than estimates. Toohey said the growth is more likely to be 1.25% annually.
This possible economic crunch led the bank to cut its potential economic growth for Australia from 2.9% to 2.5% during the period of 2015 to 2017.
As for the housing sector, the report said dramatic effects are expected with an estimated shortage of 140,000 homes in 2017 into a 75,000 surplus instead.
The Financial Review reported that Toohey is a strong advocate of household formation as a key driver of housing demand.
In 2012, the bank upgraded its outlook for residential construction because of the emerging undersupply - the largest since the 1970s - as well as the need for a large cut in interest rates.
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