Unit starts boost residential construction in June quarter but house starts fall to 11-year low: ABS

Australian dwelling starts rose by 4.6% in the June quarter to 34,116 – the first rise in five quarters – boosted by a 19% rise in apartment starts, which reached 13,011, according to new ABS figures.

However, in the more depressed detached new housing sector, starts fell 1.7% to 20,523 to be at their lowest level in more than a decade (June 2001 quarter).

New housing starts are down 10.7% year-on-year, while unit starts are down 4.9% year-on-year.

Over the year to June 139,349 dwellings were commenced down 2.7% on the prior year.

The 11-year low for new housing starts comes a day after the Queensland state government introduced a new $15,000 first home owner construction grant taking effect today.

A similar scheme will take effect in NSW from October 1.

“The announcement of additional assistance to Queensland’s housing construction sector in the 2012?13 State Budget is likely to see a sustained increase in Queensland housing construction,” says Commonwealth Bank economist James McIntyre.

“Our broader housing construction outlook already incorporates a recovery in Queensland activity levels.”

Peter Jones, chief economist at Master Builders Australia (MBA), which successfully lobbied the Queensland government to introduce the new $15,000 construction grant, says the June figures are cold comfort for builders who continue to face very difficult operating conditions.

“Builders are struggling and with little joy in the forward indicators there is an urgent need for policy action at all levels of government.

“Further rate cuts from the Reserve Bank are needed to turn consumer pessimism around and ensure that demand recovers.

“Removing policies that work to restrict supply must be a focus for all governments. Policies that prevent the residential building industry meeting the serious undersupply of housing must be addressed. Poor land release strategies and inefficient developer charges should be the first place to start.

“The housing sector has been underbuilding for the past seven years and it is crucial that Australia’s residential building industry now embarks on a major growth phase to overcome the housing shortfall.

“Urgent reform is required to address supply bottlenecks otherwise a strong industry response to meet underlying demand cannot eventuate. This will exacerbate Australia’s housing affordability crisis, increasing rents and house prices as people chase less stock,” says Jones.

On a state-by-state basis, dwelling commencements increased by 25.9% in New South Wales, 2.8% in Victoria, 8.1% in Queensland and 68.8% in the Northern Territory.

HIA chief economist Dr Harley Dale pointed out that improvements in the June quarter were "narrowly based, primarily occurring in the non-detached dwelling segments of New South Wales and Victoria, which recorded impressive increases of 64.5% and 15.8%, respectively.

“This reflects the market’s response to policy changes in these two states," says Dale.

Seasonally adjusted dwelling commencements fell by 9.3% in South Australia, 6.1% in Western Australia, 5% in Tasmania, and 1% in the ACT.

The HIA says the June quarter figures confirm that Australia’s new home building sector fell back into recession in 2011-12

"To lift dwelling commencements off a GFC-equivalent low from 2012-13 requires policy reform and investment from federal and state governments, augmented by further interest rate deductions," says Dale.

"Too few governments in Australia are implementing the policies required to stem the negative consequences a persistently weak new housing sector is having on tens of thousands of Australian businesses and many more labour market participants.”