The downturn in home building activity throughout Australia has almost run its course, a leading housing group says.
Releasing the Autumn edition of its National Outlook, Housing Industry Association said its expects the number of dwelling commencements which take place throughout Australia to stabilise during calendar 2020 and edge up from 174,770 in calendar 2019 to 175,840 in calendar 2020.
This follows a drop of 22 percent during calendar 2019 from record highs experienced during calendar 2018.
Moreover, on a quarterly basis (seasonally adjusted), HIA’s forecast indicates that dwelling commencements have already started to recover after bottoming out in September last year (see chart).
These forecasts have been supported by leading indicators such as building approvals and the number of loans issued for the purchase and construction of new dwellings – each of which have trended upward since the middle of last year.
HIA Chief Economist Tim Reardon said the market for new housing construction reached a turning point toward the end of last year.
Nevertheless, he warns that the next recovery will be modest and will merely see the current rate of home building maintained with low growth.
“The number of homes that commenced construction in Australia fell from 225,061 in 2018 to just 174,770 in 2019 …,” Reardon said.
“… 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. The next upswing in new home building will not see a return to the hive activity of the boom years, 2014 to 2018. These years set a record that will not be eclipsed in the foreseeable future. Population growth has pulled back from previous heady days but has nevertheless remained relatively strong, just shy of 400,000 people per annum. This steadier rate of population growth along with much of the underbuild, now largely worked down, means the pressure for new builds won’t reach the same fever pitch.
“… As for the anticipated recovery in new home building we think it will be a very modest affair. At best, this next cycle will see the current rate of home building maintained, with slow growth in coming years.”
Speaking about the coronavirus and associated travel restrictions, Reardon says the effects of these are still emerging and have not been considered in the latest forecasts.
Nevertheless, he says ‘international factors’ are likely to impact upon the volume of new home construction in Australia over the longer term and that the effect of trade and tourism poses a ‘material downside’ to the forecasts.