Home building levels still falling short
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Home building levels still falling short
Posted on Monday, May 18 2015 at 12:25 PM
The latest Housing Industry Association National Outlook reveals a record level of home building activity that still falls short of the current demand for new dwellings.
“The
HIA Autumn 2015 National Outlook shows new housing construction is at
record levels and is single-handedly propping up Australia’s domestic economy,”
HIA chief economist Dr Harley Dale says.
“Ongoing
momentum in 2015 is narrowly driven compared to last year, in terms of both
geographical area and dwelling type – it’s far from a universally strong story.
“It’s
disappointing that despite record new housing supply, many Australians are
being priced out of the market due to the excessive and inefficient taxation
and regulation governments impose on the new housing sector.
“Super
low interest rates are doing their job, but there’s a lack of complimentary
policy reform,” Dale adds.
“The
detached house construction cycle had peaked well below its potential because
households can’t pay the cost of waiting up to 14 months for titled land, or
multiple months for a simple building approval, or borrow the additional amount
required to cover government-imposed gold-plating of user pays infrastructure.
“A
lack of focus on housing policy reform is shutting Australians out of their new
home at a time when they could borrow responsibly at attractive interest rates
and be part of the great Australian dream,” Dale concludes.
Key
points from the report include:
- New home building is the star of the Australian domestic economy.
- Outside new residential construction, both business investment and
public sector investment are weak. Domestic demand has been hit by the
reduction in earnings growth – to its slowest pace in almost two decades. - New dwelling commencements are projected to see a third consecutive year
of growth in 2014/15. An increase of 12.9 per cent is forecast to bring
commencements to an all-time high of 205,490. The ultra-low interest rate
environment means that there is some upside risk to this forecast. - HIA’s latest projections indicate that dwelling commencements will fall
by 10.6 per cent in 2015/16, with a further reduction of 4.7 per cent in
2016/17. The bulk of the decline will be concentrated in the multi-unit market
segment. - The further upward momentum to new home building in 2015 is confined to
two states – New South Wales and Queensland. - Detached house commencements have peaked for the cycle at a level of
112,232. There is unrealised demand for detached housing due to a lack of
shovel-ready land and a plethora of other supply side obstacles. - Detached house commencements would have increased further in 2015
without these barriers to supply. - Across the distinct types of new dwellings constructed, the upward
momentum in 2015 is most evident for units of four or more storeys. - There is some upward momentum evident for semi-detached/townhouse
product. - Housing renovations continue to struggle, increasing by just 0.8 per
cent during 2014. For 2014/15 as a whole, it’s expected that the volume of
renovations will fall by 4.1 per cent to $27.4 billion, which will be the
lowest value since 2001/02. - Continued low interest rates and an economic recovery will eventually
start to lift the renovations market. During 2015/16 growth of 2.3 per cent is forecast, followed by a slight increase of 0.5 per cent
during 2016/17. A further rise of 2.5 per cent in 2017/18 is projected to bring
the value of renovations activity to $28.8 billion.
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