Home building to hit 20 year record in 2014: HIA
By the end of this year, the Housing Institute of Australia (HIA) expects construction will have commenced on 188,000 new homes – the highest level of housing starts since 1994.
20 years ago, housing construction hit its previous peak at 187,000 starts.
According to HIA's National Outlook for Spring 2014, housing starts are likely to decline in next few years after this year's peak. Next year is predicted to see 183,900 starts, with 177,300 for 2016, though these figures are still described as "elevated by historical standards".
Source: HIA
According to HIA chief economist Harley Dale, growth in housing construction has been slower than previous cycles to gain momentum.
"The momentum culminating in this milestone has provided a substantial boost to Australia's economy at a crucial juncture in the cycle. Below trend economic growth and weak labour market outcomes would be considerably worse without the reach a new home building recovery is exerting into the broader economy," said Dale. He noted housing demand has been boosted by a number of factors.
"Record low borrowing costs have combined with other factors such as high net overseas migration to unleash substantial pent-up demand for new housing. These factors will keep the level of new homes commenced at historically elevated levels. However, what the economy needs is further growth in new home building over the next couple of years, but that will only occur as a consequence of taxation and regulatory reform," Dale said.
While construction on new dwellings has reached a historic high, renovations activity increased just 0.3% in 2013-14 from a 10 year low, according to HIA.
Source: HIA
"Unemployment concerns, a lack of available credit, and an elevated household savings rate are but three elements in the current environment which mean there has not been room for a renovations recovery alongside new home building activity and existing property price growth," said Dale.
However, HIA does predict renovations growth will increase to more than 2% in the next three financial years.