Speaking at the Housing Industry Association’s (HIA) Industry Outlook forum, Shane Garrett, HIA senior economist, said that high volumes of housing will continue through to at least 2019.
The HIA’s recent Housing Outlook Report states 221,500 new dwellings in 2016-17, which is 4.5 per cent lower when compared with the previous year, and a further fall of 10.7 per cent is predicted for 2017-18.
Driving this fall is said to be multi-units, with new construction predicted to fall by 41 per cent during this time.
“Solid population growth, very low interest rates and consistent gains in employment do mask some concerning trends with respect to underemployment and decelerating GDP growth,” Mr Garrett said.
“Combined with another layer of obstacles to foreign investor participation in the housing market, new home building volumes are set to move downwards over the next couple of years.
“Having achieved record levels early in 2016, new home building starts are clearly in a downward cycle.
Mr Garrett said this downward cycle is different than previous cycles, as the bottom, predicted for 2019, will be higher than the peak of the last boom in 2010 and the peak in 2015-16, which “dwarfed all previous peaks,” resulted in a backlog that means the construction industry will still be building houses into at least 2018.
“The housing boom was not consistent across Australia and now, with NSW and Victoria cooling, all indicators are that the market is well past its 2016 peak when over 231,000 new homes were commenced,” he said.
“Even though new dwelling starts will decline over the next couple of years, the annual volume of new home starts is not likely to fall below 170,000 at any stage. By any standard, this is still a very elevated level of activity.
“The investor side of the market has also been hit by tighter lending finance due to APRA’s recent restrictions on interest-only mortgages.”