New home building is set to break a 20-year record in 2014, with 190,000 new homes to be commenced over the year. The previous record was set back in 1994, when 187,000 new homes were built.
Commenting on the growth in residential construction – outlined in the Housing Industry Australia’s spring edition of its National Outlook – HIA chief economist Harley Dale said it has been different to previous growth cycles.
“The growth in new residential construction has been slower to gather momentum and breadth, in terms of both geographical location and dwelling type, so the ‘look and feel’ of this cycle is different to historical experience,” he said.
“The momentum culminating in this milestone has provided a substantial boost to Australia’s economy at a crucial juncture in the cycle. Below trend economic growth and weak labour market outcomes would be considerably worse without the reach a new home building recovery is exerting into the broader economy.”
Dale says record low borrowing costs and high net overseas migration has unleashed pent-up demand, driving new home construction. However, despite breaking a 20-year record, the economy is not in the clear just yet.
“These factors will keep the level of new homes commenced at historically elevated levels. However, what the economy needs is further growth in new home building over the next couple of years, but that will only occur as a consequence of taxation and regulatory reform,” he said.
“It is still an impressive achievement to build a record number of new homes, at a level that approaches what the average build rate will have to be if we are to adequately house our growing and ageing population in coming decades.”