Crane count indicates home price growth may have peaked in Sydney and Melbourne: AMP Capital

Crane count indicates home price growth may have peaked in Sydney and Melbourne: AMP Capital
Crane count indicates home price growth may have peaked in Sydney and Melbourne: AMP Capital

Cranes in the sky provide insight into the constructor sector, especially when it comes to residential unit supply.

To illustrate the scale of construction in Sydney alone, which has more than 50 percent of all cranes in Australia, the residential crane count rose to 292 in March this year from just 62 in September 2014.

AMP Capital’s latest weekly economic and market update points to the crane numbers as an indicator that home price growth has peaked in Sydney and Melbourne and that price declines lie ahead, particularly for units. 

In explaining its outlook, AMP Capital says “the latest Australian bank rating downgrades tell us nothing new but the drip feed of negative news around the property market in Sydney and Melbourne is continuing to mount: surging unit supply, bank rate hikes, tightening lending standards, reduced property investor tax deductions, ever tighter restrictions around foreign buyers”.

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Crane count indicates home price growth may have peaked in Sydney and Melbourne: AMP Capital 

Residential cranes soared to 292 around Sydney which accounts for 45% of all Australian cranes and 53% of all residential cranes in Australia, the RLB Crane Index indicates. 

An analysis of the last crane index, based on September's count, showed over a third of the cranes building Australia's next wave of apartments due for completion in the coming two years are in the ‘blacklisted’ postcodes of lenders, meaning banks view them as risky suburbs to lend, the Australian Financial Review reported. 

The settlement risks, compounded by China’s crackdown on outflows and Australian banks’ tightening of credit to Chinese investors, could point to a crisis.

According to the March count, residential cranes in Sydney jumped by 34 to 292 from 258 six months earlier. In Melbourne, the number of residential cranes rose by a net 13 to 122 from 109 in September, but remained below the total 124 counted a year ago. 

Ofcourse the biggest concerns of an oversupply of apartments are in Melbourne.

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Crane count indicates home price growth may have peaked in Sydney and Melbourne: AMP Capital

As to the broader crane index, the number of cranes on the skylines of seven of 10 cities counted fell to a total 654 in March from 666 in September, driven by a decline in the number of cranes on commercial, education and public projects. 

This was the first decline in the total number of cranes across Australia's skyline since Rider Levett Bucknall (RLB) Oceania Research & Development and Communication teams created the RLB Crane Index in 2012.

But even as residential cranes dominated the count – and increased to 548, or 84 per cent of the total – the sector showed further signs of the slowdown that was first apparent six months ago. While apartment-heavy Melbourne increased its number of cranes after September's fall, it failed to make up all of that lost ground. Brisbane declined further.

The report also reflects the moves by developers to smaller-scale projects in inner-ring suburban away from large CBD projects. 

Tags: 
Residential Development Price Growth

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