Well known quality problems in Australia’s construction market will not impact overall levels of new housing demand but may cause some shift in demand away from high-rise apartments towards lower density dwelling stock, a leading housing industry economist says.

Speaking at the Housing 100 Breakfast hosted by Housing Industry Association (HIA) and Colorbond Steel in Melbourne last week, HIA Chief Economist Tim Reardon says that media reports of high-profile issues regarding cladding, waterproofing and structural defects would not impact the overall level of demand for new housing.

Despite concerns over quality, Reardon says people still need spaces in which to live.

Nevertheless, he says the problems may impact the type of housing which people buy as consumers shun high-rise in favour of detached and semi-detached housing.

“The macro answer is not at all because people still need to live in houses,” Reardon said, asked about the impact of well-publicised construction defects upon overall housing demand.

“It’s just a question of which one you are going to live in. From a detached housing market perspective, if consumers respond to what’s going on in the media at the moment and shift away from apartments, that’s positive news for semi-detached and detached houses.

“From a macro perspective, (however,) it’s about population and wage growth and GDP growth.”

Reardon’s comments come amid ongoing concern about the level of construction defects which are apparent in new housing.

Particularly in the apartments sector, there has been considerable media coverage about combustible cladding, structural defects and waterproofing issues over recent years.

Westpac Chief Economist Bill Evans broadly agrees.

Speaking about the apartments sector, he says concerns over construction quality may contribute toward greater caution from investors in off-the-plan buying.

This, along with other factors such as the significant number of completions set to hit the market, may contribute toward greater challenges for developers in obtaining the required volumes of presales which are needed to secure new project funding.

This, Evans says, is one factor behind a broader view which he holds that approvals in the high-rise sector will remain soft over the near-term.

“I think the test is going to come now as completions are peaking at the moment so there is a lot of stock coming onto the market,” Evans said.

“The primary issue would be the ability of developers to get pre-sales and therefore to get funding and whether investors on a pre-sale basis off the plan sales will be more cautious (as a result of the quality issues). It seems reasonable that they may well be.”

“That’s one of the factors behind my view that the completions are going to be falling quite substantially over the next few years has approval to remain soft.”