Policy constraints spell end for home building upturn: HIA

GUEST OBSERVER

The Winter 2015 National Outlook has been released today by the Housing Industry Association. The report is the most comprehensive quarterly review of Australia’s residential building industry, and includes forecasts for new home building and renovations activity.

During 2014/15, we estimate that a total of 214,450 new dwelling commencements occurred across Australia. This is easily the highest yearly total on record.

HIA's recent National Outlook identifies the role of the low interest rate environment in supporting higher levels of new home building, as well as strong, migration-driven population growth over the past decade.

However, other elements are serving to frustrate the delivery of new housing supply. We are faced with an excessive taxation burden on new housing, land release which is simply too slow and a raft of planning restrictions. All of these make it difficult for our industry to meet the housing needs of Australians.

The effect of these supply bottlenecks will become apparent over the next 12 months, with the volume of new home building projected to decline by 7% during 2015/16.

During the upturn, multi-units accounted for an increasing proportion of new home building. Consequently, the multi-unit segment will see larger rates of decline over the coming years compared with the detached house segment.

HIA projects that new home building will bottom out at around 175,000 per year towards the end of the decade. Critically, this falls short of Australia’s long term requirements and emphasises the importance of reform around taxation and housing supply policy.

Shane Garrett is senior economist for HIA and can be contacted here.