Is a tsunami of new housing about to swamp Australia and lead to a property market crash?

“That’s funny!” says Harley Dale, the economist with the Housing Industry Association. “There’s no doubt we’re building a record number of new homes this year but that only means we’re making inroads into a very large shortage of housing that has built up over many years.

“I think some people, as a result of that, are making sensationalist suggestions that we’re facing an Armageddon of sorts, and that the sky’s about to fall in on us. But the reality is simply that we are making some inroads into the existing shortage.”

At developer Crown Group, sales and marketing director Roy Marcellus is equally nonplussed. He’s just presided over the record-breaking $380 million off-the-plan sale of the company’s new residential building at Green Square, Infinity by Crown, where all 305 apartments sold within three to four hours.

“An oversupply of new homes?” he asks. “Are you crazy? That’s a crazy, a very crazy statement. We’re only catching up on a very big shortage of accommodation in Sydney.

“We had over 800 expressions of interest for homes in that building, and we’re now having to refund the deposits of more than 500 people. And lots of them have said they don’t want their deposits back; they want us to put them against our next building in Waterloo that we’ll be launching next year.

“But we’ve had to turn them down. We don’t even have an account set up for that one yet … But we have so many buyers and just nowhere near enough supply for them.”

The fall in the Sydney auction clearance rate to 71.3 per cent last weekend, the lowest result of the year – from the high of nearly 90 per cent in May – and the lowest spring Saturday rate of the last three years, has led to some commentators forecasting the imminent collapse of the market.

Others, however, have explained the softening rate on the surge of properties on to the market by vendors keen not to miss out on the record rates of price growth, and allow buyers to move in by Christmas.

Meanwhile, the suggestion by global investment banking, securities and investment management firm Goldman Sachs that Australia will be facing a glut of housing by 2017, because of the number of new homes now being developed, has been greeted with derision in many quarters. The assertion by the head of real estate research at the University of NSW, Nigel Stapledon, that there is “a tsunami of home supply coming” is also being challenged.

“If there were a tsunami of new housing coming, that would actually be very good news for most Sydneysiders, especially first home buyers!” says Domain Group senior economist Dr Andrew Wilson. “But in truth, there’s far too little new product coming.

“There is a lot being built now, but it’s just not enough.”

Dr Wilson says net migration into NSW alone is currently running at 60,000 a year, and homes have to be found for all those people, as well as the demand from the local population.

The strong NSW economy is also encouraging more people from interstate to come to Sydney to look for work, while the rental market is seriously under-supplied and over-subscribed – evidenced by the tightening vacancy rate and higher and higher rents.

“Sydney will more likely than not remain under-supplied in terms of property, with affordability still being a major factor,” says Dr Wilson.

Although just over 50,000 new dwellings are currently under construction in NSW, which is, believes Harley Dale, a 20-year record, it’s still not enough to plug the gap.

“We need to build close to 60,000 dwellings in NSW this year, and then we need to do that for another year, and arguably two, before we’ll come close to taking care of the shortage,” he says. “We have a long way to go to completely alleviate that shortage that’s been allowed to build up.”