Supply v demand #1 – Established housing market

Let’s start with some numbers.  These figures are for Australia and cover the 2021 calendar year.

Detached houses

Annual demand (sales):                   425,000

Supply (Listed for sale):                   158,000 (as of January 2022)

Supply in months:                            4.5

Annual price growth:                       25%


Attached dwellings (mostly apartments)

Annual demand (sales):                   220,000

Supply (Listed for sale):                   60,000 (as of January 2022)

Supply in months:                            3.3

Annual price growth:                       15%


Two charts are enclosed in this post too.

The first chart shows the supply and price growth trends for Australian detached houses and the second visual does the same for attached dwellings.

Some observations

As one might expect – as real estate at its core is all about supply and demand – there is a close relationship between the supply and demand interplay and price growth.

For both detached houses and attached dwellings the recent and rapid decline in supply is atypical and has been heavily influenced by Covid-related restrictions.  At the same time, demand was somewhat abnormally boosted by government largesse, record low interest rates and silly RBA overtures.

Supply is likely to increase and maybe rapidly this year as we finally learn to live with the virus (fingers crossed) and many homeowners sell in order to capitalise on higher price points.

Conversely demand is likely to fall due to falling confidence and higher interest rates.  

Price growth will slow down as a result, and we might even see prices fall if supply exceeds demand.

Finally, the attached dwelling market supply is now very tight – and is tighter than detached houses – so we are likely to see higher price growth for apartments and townhouses than detached houses over the short-term.


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