Residential construction set to run out of steam

by AB31 Aug 2015
Australia’s residential construction boom has less than two years left to run according to a report released last week.

Economic forecasting firm BIS Shrapnel this week released their Long Term Forecasts 2015-2030 report, which predicts the Australian economy will face a “soft period” of three years as the final impacts of the mining boom drop off are felt.

Included in that soft period will be a flat-lining of residential construction levels after they enjoy a brief spike.

“This upswing was delayed due to weak housing market sentiment and excessive caution by investors,” BIS Shrapnel said in a statement accompanying the report’s release.

“However, with the expectation of low interest rates for an extended period, and a growing deficiency of stock, a solid increase in dwellings building is now well under way and will build momentum from here.”

The increased construction levels will last for around 18 months the report claims; however activity will not be spread evenly across the nation.

“The report forecasts there is another 18 months of strong residential building along with improved alterations and additions activity before the current dwelling investment cycle runs out of puff.

“But this upswing will not be uniform between regions, with sizeable stock deficiencies set to drive the markets – in particular, in parts of Queensland and New South Wales.”

The report predicts a similar future for non-residential construction projects, as a fall-off in government projects occur.

“Private non-dwelling building is also likely to experience solid growth over the next two years. But that will be offset by falling government building – in particular, in hospital projects.

“A healthy pipeline of projects in the offices, retail accommodation, warehouses, aged care and entertainment and recreation segments will push overall building higher this year and next.

“However, completion of these projects and absence of new ones will cause activity to decline from 2016/17.”
 

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