Australian Property Updates

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Housing construction to slow by mid 2011

THE recovery in building new homes is expected to stall in 2011, the peak residential construction body says.

The Housing Industry Association’s (HIA) National Outlook for the March quarter says the recovery in new home building will cease in the middle of 2011.

“It is not too late to turn the situation around through policies targeted at new home building combined with more rapid progress in reducing structural supply side barriers,” HIA chief economist Harley Dale said.

“The empirical data, observations on the ground, and the slow progress in reducing supply side obstacles all currently point to the first increase in housing starts in eight years in 2010 reverting back to a decline in starts in 2011.”

Housing starts are forecast to rise 20 per cent in 2010 to 165,940, before dropping by three per cent in 2011.

Dwelling approvals were 14,144 in April 2010, up 48.4 per cent from its recent trough in January 2009, official data showed.

Market analysts have attributed this rise to Government grants for first time home owners and generational low interest rates until the latter part of 2009.

The nation needed to build 190,000 dwellings in 2010 to cope with underlying demand and construct 420,000 more than has been built over the past decade, Dr Dale said.

“A failure to build sufficient homes is placing huge pressure on rental markets and is making it very difficult for younger Australians who aspire to home ownership to achieve that goal,” he said.

“If the current recovery peters out as soon as the positive impact from past stimulus has gone, then the pressure on renters and the wider entry level marker will intensify further.”

Dr Dale said the renovations sector expanded for the third consecutive quarter during the January-March period.

“Improving labour market conditions and existing home price gains are forecast to see the total worth of the renovations sector increase by seven per cent in 2009/10,” he said.

“Growth of four per cent is forecast in each of the subsequent two years, taking renovations activity to a worth of $36.4 billion in 2011/12.”

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