Outlook for new home building in Australia positive for 2014

New house building in Australia is expected to continue growing in 2014 but it will be concentrated in large states like New South Wales, Queensland and Western Australia, according to the Housing Industry Association.

In its latest outlook report says recent months have seen higher levels of new homes being built and a steady recovery in renovation investments from a 10 year low.

‘The improving level of dwelling commencements achieved in 2012/2013 will be consolidated this year before moving up a further leg in 2014/2015,’ said HIA senior economist, Shane Garrett.

‘Meanwhile, renovations investment is expected to grow in a majority of states and territories after falling to a ten year low during 2012/2013,’ explained Shane Garrett, adding that renovations growth will be much more broad based, with increases occurring across most states.

Looking further ahead, the HIA predicts that dwelling commencements will lift above the 170,000 per year mark by 2016/2017 and renovations activity is also likely to increase steadily, reaching $30.3 billion by 2017/2018.

‘Record low interest rates and strong population growth is driving increased demand for housing. In this context, it is absolutely crucial that planning reforms and infrastructure delivery facilitate the requisite supply of new housing,’ said Garrett.

‘There currently exist many bottlenecks around land supply, infrastructure and the time taken to achieve planning approval for new dwellings. It is important that both federal and state governments address these obstacles and work with the housing industry in delivering a sufficient supply of affordable housing,’ he added.

Meanwhile, the latest data from the Australian Bureau of Statistics shows that new home lending during September increased marginally. During the month the number of loans advanced for the purchase and construction of new homes edged up by 0.4% to 8,366 on a seasonally adjusted basis. This represents the seventh consecutive month in which lending has been stuck at around the 8,300 level.

‘Despite encouraging signs of increased activity in the housing market, these figures continue to demonstrate how restrictive lending is one of the factors holding back activity,’ said Garrett.

‘However, activity is considerably stronger than this time last year. The annual increase in lending for home construction was up 6.3% during the September 2013 quarter. Lending activity for new home purchases was 27.5% higher than a year earlier. Other housing market indicators like prices, approvals and sales confirm that the industry is entering into a strong recovery,’ he pointed out.

During the September quarter, the number of loans to owner occupiers for the construction and purchase of new homes rose by 0.5%, including a 0.8% increase in the number of loans for the construction of a new dwelling and a 0.1% rise in loans for the purchase of new homes. Excluding refinancing, the number of loans to owner occupiers for home purchase rose by 1.5% in the September 2013 quarter.

Loans for new homes increased strongest in Tasmania, up 29.6% and South Australia which was up 10%. In Queensland there was an increase of 3.8%, Victoria was up 1.3% and New South Wales up 0.7. The number of loans declined by 8.1% in Western Australia.