Housing Industry Association's Tim Reardon predicts slow recovery for home building
The number of homes that commenced construction in Australia fell from 225,061 in 2018, to just 174,770 in 2019, according to the Housing Industry Association (HIA).
This represents the second sharpest contraction ever experienced by the industry, only exceeded by that caused by the introduction of the GST.
According to the HIA’s assessment, this contraction in in home building has played a major role in the slowing of the national economy.
“Despite this whopping contraction, we believe that the cycle had just about run its course and the overall housing market reached a turning point at the end of 2019, buoyed by interest rate cuts and house price growth,” said Tim Reardon, the association’s Chief Economist.
A steadier rate of population growth means the pressure for new builds won’t, in the foreseeable future, reach the same fever pitch as they did in 2014 and 2018.
An anticipated recovery in new home building is expected to be modest, with slow growth in coming years due to international factors. As a consequence, upward pressure on rents are predicted.
“Unfortunately, international factors are likely to impact on the volume of home building in Australia over the medium term. The effects of trade and tourism restrictions with China pose a material downside risk to our forecasts. As these effects are still emerging we have not factored them into our forecasts,” Mr Reardon added.
“If the impact on tourism and trade is short-term, and if the Australian Government’s infrastructure projects do finally flow through to work on the ground then Australia will continue its record run to 30 years of continuous economic growth.”
HIA Economics predicts these dynamics to weigh more heavily on multi-unit rather than detached house construction.
On average, during the 2014-2018 boom the industry was commencing construction on nearly 105,000 multi-unit homes per annum. HIA is forecasting that the industry will commence construction on 75,750 multi-unit homes in 2020/21, 77,390 in the following year and 80,980 in 2022/23.
They further predict that detached house construction will rise from 101,390 houses in 2020/21, to 102,750 houses in the following year and then to 104,350 in 2022/23.