Are property stocks getting affected by cooling down of the property market?

Are property stocks getting affected by cooling down of the property market?
 
The latest house approving data released by the Australian Bureau of Statistics (ABS) has added to the property market woes. The data signaled that the Australian dwelling construction is lately facing challenges. There has been a 3.3 per cent slip in the number of dwellings approved in October 2016 in trend terms. In seasonally adjusted terms, dwelling approvals plunged 12.6 per cent in the month owing to a fall in total other residential dwellings (23.5 per cent) while total house approvals slipped 2.5 per cent. From region-wise view, dwelling approvals decreased in South Australia (4.6 per cent down), New South Wales (3.8 per cent down), Queensland (3.6 per cent down), Victoria (3.3 per cent down), Western Australia (3.0 per cent down), Tasmania (2.6 per cent down) and Northern Territory (0.2 per cent down) in trend terms. On the other hand, the Australian Capital Territory witnessed a rise of 4.5 per cent. There was a 0.6 per cent fall for approvals for private sector houses in October, in trend terms. The monthly decline in October for the high-rise approvals figure now seems to be at two-year record low. The fall in approvals will gradually impact the construction activity which is expected to witness a hit in next few years. 

Value of new residential building (Source: Australian Bureau of Statistics)
 
The bumpy ride for the property market began earlier this year when it was noted that receipts from residential stamp duty in the month of July were quite low against corresponding month of prior year. This was lowest in nearly five years on a year on year (yoy) basis. The sluggishness in housing loan approvals and credit growth seem to have affected the property market. Many experts like AMP Capital chief economist Dr Shane Oliver, had stated that the Australian property market will “start going negative” in 2017 if interest rates rise or the country enters a recession, with possible falls of up 10% in houses and up to 20% in units. Australia has been said to be gradually heading towards a cyclical downturn in property prices and the apartment market will be far more vulnerable. Further, traditional measures entailing population growth versus completion rates, supply and demand of properties and so forth, may seem to be heading for a disordered ending to the high-rise boom. The demand from foreign apartment buyers is also subdued. It had been further identified that Australia has a greater oversupply problem than the US did in 2007.
 
With the current turbulence, many Australian property stocks have witnessed price volatility and negative sentiments have started prevailing for building materials stocks. To name a few, stocks like Fletcher Building and Adelaide Brighton are seeing the impacts gradually. Then Stockland Corporation Ltd, which has a diverse mix of real estate including shopping centers, aged care homes, residential housing construction and other commercial property, saw a stock price drop of over 12.8% over the last three months. Similarly, Growthpoint Properties Australia Ltd has also seen fall in share prices and is down over 7% in the last three months. Mcgrath Ltd stock followed its peers and lost over 21.5%.
 
However, the developments in the next few months will be crucial to understand the emerging trends.

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