Construction levels to trend downwards from next month

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Australia’s building boom will begin to slow as soon as next month according to economic forecasting firm BIS Shrapnel.

Demand for detached housing is set to remain high, however and wave of recently completed apartment projects will push the multi-unit sector into oversupply, resulting in a drop in construction levels.

"The important story here is apartments. To read the current cycle is to read the apartment cycle," BIS Shrapnel associate director Kim Hawtrey said told Fairfax media outlets.

"Detached houses will continue on being built. It's like the grandfather of housing. They will keep going on after the party finishes,” Dr Hawtrey said.

Speaking at the BIS Shrapnel's Forecasting Conference this week, managing director Robert Mellor said Brisbane in particular was about to see an unsustainable level of apartments come online.

“We think there’s just too much building,” Mellor.

“They’re building about two to three times the level that they were building on average over the last 10 to 15 years,” he said.

Mellor’s comments are at odds with the Place Advisory report into June quarter off the plan sales in Brisbane, which this week said the city was trending towards an undersupply of units.

“With more residential tower cranes dotting the Brisbane skyline than many people have ever seen before, supply concerns are constantly raised by buyers, developers and industry consultants,” Place Advisory report author Lachlan Walker said.

“Given historical quarterly sales rates and current demand, the availability of Inner Brisbane apartments remains undersupplied,” Walker said.

In the same interview to Fairfax, Dr Hawtrey said BIS’ predictions of a construction slowdown and oversupply will bring cause capital growth to either fall or stagnate.

Generally, prices are already falling in Perth, and in Adelaide. There is limited upside in Melbourne and Brisbane," he said.

"Sydney will have price increases for another six months but after summer, the rate of increase will go sideways."

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