The pipeline of home building work is shrinking: HIA

If the leading dwelling construction indicators do not improve in the first half of 2019, then the pipeline of building work will be exhausted at a concerning rate, according to HIA's latest report.

The report found the pipeline of building work has expanded over recent years and the backlog that once existed has been reduced.

Tim Reardon, HIA Chief Economist said, “The downturn in the level of home building activity will be contained to the next two years, as long as migration policy is not tightened further."

“In 2018, market confidence fell away as dwelling prices corrected, adversely impacting all segments of the market. Investors and owner occupiers are delaying purchase decisions and foreign investment has also fallen dramatically for numerous reasons."

“Builders in markets with a significant volume of work in the pipeline – such as Melbourne – have not been affected by the downturn yet, but other markets that were already performing poorly – such as Perth – have seen their market fall to a new historic low point," he stated.

Tim Reardon is of the opinion that the building industry, which has been a driving factor for the rest of the economy for the past five years, will now be relying on the rest of the economy to deliver a "contained" downturn.

“The expectation that governments will not constrain net overseas migration is central to this outlook for a contained downturn."

“If the fall in overseas migration accelerates then interest rate cuts are likely to be necessary in order to mitigate the adverse impacts of this home building downturn on the wider economy,” concluded Mr Reardon.