Housing no longer main economic driver: HIA

by Miklos Bolza25 Aug 2017
The housing market has ceased being the primary driver of the Australian economy making it more vulnerable to future punitive changes enacted by the government, says the Housing Industry Association (HIA).

The HIA National Outlook (Winter 2017) paper examined the downturn in building activity that commenced in March 2016, forecasting the length and amplitude of the cycle.

The report also highlighted the role that foreign investment plays in the Australian housing market.

“Government interventions into the market so far include: state governments imposing punitive stamp duty charges on foreign investors, federal charges for foreign investors, a new set of visa rules that could slow overseas migration, restricting lending to domestic investors and new regulations limiting interest only lending,” said HIA principal economist Tim Reardon.

The Chinese government’s restrictions on outgoing capital could also have a significant impact on home building in Australia, he added.

“Foreign investors have been attracted to the Australian housing market and they have been investing billions annually in the construction of new residential dwellings. 

“These investors have contributed to activity and employment in metropolitan areas building the supply of new housing stock and easing pressure on rental markets.”

Governments of all types should be wary of imposing new punitive measures on foreign investors, Reardon said, as forcing this segment from the market could result in a downturn in the housing industry.

“A number of state governments have recently hit foreign investors with punitive charges. The Australian Government has also imposed additional regulations that will impact on investors in the sector.”

The HIA predicts that building activity will decline modestly in the coming years consistent with typical cyclical trends before activity bottoms out in 2019.

“There is a risk – if uncoordinated and poorly considered policies are introduced to curb foreign investment – that the decline in activity in the sector will be accelerated,” Reardon said.

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