The number of residential construction is dwindling despite the increasing population growth

Against a backdrop of an increasing population, the Australia housing market is failing to keep up, with the number of residential constructions dwindling.

Citing recent figures from the Australian Bureau of Statistics, The New Daily reported that there was a 3.3% decline in residential construction in the past 12 months leading to December 2017.

Commsec senior economist Ryan Felsman told The New Daily that Brisbane was the culprit, dragging down the overall construction numbers with its oversupply of inner-city units.

Felsman said the projection is for the overall market to continue cooling, with housing construction slipping from record highs in 2016 and down by more than 20,000 new residences in 2018.

More so, he said, despite their record housing construction numbers, cities like Melbourne, Hobart, and Sydney are at risk of suffering an anaemic supply of residential properties.

The movement of new people to Melbourne annually and the number of houses being built in the state make a good case in point.

"If you look at Melbourne there are 120,000 people moving to it per annum, but only 75,000 houses being built," Felsman told The New Daily.

The Urban Development Institute of Australia issued a warning last year, saying Melbourne could have a deficit of around 50,000 houses by 2020.

Should this continue, AMP Capital's Shane Oliver believes this would put the housing market into an undersupply situation. He stressed that the current figures seem to indicate that the market is approaching equality in construction versus population growth.

However, ANU's Ben Phillips had another take on the matter, saying that in fact, there is an estimated housing oversupply of 164,000 because of five years of overbuilding.

"Current building completions are at around 220,000 per annum which is at least 30,000 more than is required each year based on population growth. With five years of overbuilding, we should expect activity in new home construction to decline in the coming years," he told The New Daily.

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