WA, NSW and Queensland to lead rebound in residential construction from 2013: BIS Shrapnel

WA, NSW and Queensland to lead rebound in residential construction from 2013: BIS Shrapnel
WA, NSW and Queensland to lead rebound in residential construction from 2013: BIS Shrapnel

There will be little reprieve for the residential building sector in 2012, but there will be growth in new home building led by WA, NSW and Queensland in 2013, according to forecasts from BIS Shrapnel. 

In its March 2012 Economic Outlook bulletin, BIS Shrapnel says that uncertainty around the economic outlook and funding difficulties for developers has meant that building approvals and commencements have remained weak, with new dwelling investment activity continuing to contract “for the next couple of quarters”. 

“However, increased first home buyer interest, interest rate reductions late last year, and extensive or emerging dwelling shortages should result in activity picking up later this year in New South Wales, Queensland and Western Australia,” the report says. 

BIS Shrapnel is forecasting a 5.2% fall year-one-year in total private dwelling investment for the year ended June 2012, recovering to a rise of 4.7% for the year ending June 2013. 

“We expect activity in the construction industry to remain weak for the next couple of quarters, before picking up in the second half of the year. The increased activity will initially be dwelling related, but we expect to see non-dwelling building activity also increasing, particularly in 2013,” says BIS Shrapnel. 

Western Australia is forecast to lead the rebound with a 29% gain in the value of new dwelling construction in 2013 following an 11% dip in 2012. 

In 2013, the total number of new houses built in WA is forecast to rise by 25% to around 19,000 following a 7% dip in 2012 while unit construction will jump by 47% to over 4,000 in 2013 following a flat 2012.

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BIS forecasts a 26% jump in residential construction in New South Wales in 2013 following a flat 2012.

There will be a modest 2% increase in the number of dwellings built in NSW in 2012 followed by a large 31% gain to over 40,000 in 2013, says the forecasting firm. 

Sydney is set to be the focus of new dwelling approvals in 2012, with 14% growth in the number of new homes approved in 2012 with 15% growth in 2013 to above 20,000. Strong growth in building approvals is also forecast for the Hunter region (12% in 2012 and 19% in 2013).

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Queensland’s residential construction sector is forecast to expand by 21% following a forecasted 7% dip in 2012. 

In terms of total numbers, new dwelling construction is expected to drop by 3% in Queensland in 2012 but increase by 22% to over 30,000 by 2013.

Among the smaller housing markets, BIS Shrapnel is forecasting a massive 47% boom in new housing construction in the Northern Territory in 2013 off the back of the $30 billion Inpex onshore gas project. 

Reflecting the imbalances in the economy, new dwelling construction is forecast to fall by 21% in Victoria in 2012 and then by a more moderate 7% in 2013 as the construction contraction in the state starts to bottom out. South Australia will rebound by 4% in 2013 and Tasmania by 5%. 

The outlook for the ACT is very poor, with a 27% drop in the value of new construction expected in 2012 followed by a 33% drop in 2013. 

Across the country new dwelling construction growth is forecast to dip by 13% in 2012 but will wipe out this deficit in 2013 with a 13% gain. 

Housing construction will rebound by 12% in 2013 following an 8% dip in 2012, while units will rebound by 15% in 2013 following a 15% drop in 2012. 

In its report, BIS Shrapnel says household income growth has slowed over the past couple of quarters, but still remains solid. 

“We expect it to start increasing again through the second half of 2012, driven by higher wage inflation and a return to employment growth,” the report says. 

“Nominal compensation of employees increased just 0.9% in the December quarter, reflecting zero employment growth and decelerating wage inflation over the year. 

“However, strong growth earlier in 2011 meant that year-on-year growth in nominal compensation of employees was still a very respectable 7.6% in the 12 months to December 2011. 

“We expect the annual rate to drift down to around 6% by the end of 2012, before it accelerates again. This will continue to support solid growth in household spending.” 

BIS Shrapnel forecasts an average standard variable mortgage rate of 7.4% in 2012, rising slightly to 7.8% in 2013.

 

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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