New home starts continue downward trend

Building activity in Australia has reached its peak with a steady decline predicted by one leading industry association

New home starts continue downward trend



New building figures released by the Australian Bureau of Statistics (ABS) have revealed a steady decline in the level of building activity around the country.

“Building activity has declined to levels last experienced in the middle of 2014, before the record peak in March 2016,” said Tim Reardon, principal economist of the Housing Industry Association (HIA).

“At the core of this drop in activity is primarily the slow-down in construction of new apartments and units, particularly on the east coast. A record number of apartments are due to come onto the market this year and the next phase of investment is now not likely to occur until the apartments currently under construction clear the market.”

Levels of activity in low-rise home construction dropped by 7.7% this quarter, declining across all states and territories, he said.

However, Reardon also stressed that this downward trend was not a cause for alarm.

“We are coming down off the back of records levels of activity in recent years, particularly in apartments. The housing industry is well placed to balance cyclical changes in demand and HIA’s forecasts expect that we will return to a growth market before the end of the decade.”

He urged policy makers to be aware of these changing trends and ensure that any policy changes recently made did not lead to unintended consequences.

Looking at the individual states and territories, Reardon pointed out that Western Australia and Tasmania were the only regions to report an increase of building activity with 4.1% and 12.3% respectively.

“A sharp drop in apartment construction in Sydney dragged down overall activity in NSW by 17%. South Australia experienced an 11.1% decline. Queensland was down by 10.2% also due to a decline in unit construction. Victoria dropped by just 1.9%.
“Commencements in both the ACT (-65.8%) and the Northern Territory (43.4%) declined dramatically. The ACT figures are an aberration and activity is returning to longer-term trends.”

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