The Housing Industry Association says that new residential building will slow for the next two years to bottom out at what will still be a historically healthy level of activity.
"Notwithstanding the current uncertainties around the broader economic outlook, especially with the future US policy settings up in the air, HIA is forecasting a measured return to more normal levels of home building activity over the next couple of years," HIA Acting Chief Economist Warwick Temby said.
“The recent peak in new home building was unprecedented: an all-time record 229,823 new residential dwellings started building in 2015/16. This record level of building has made a major contribution to Australia’s economic growth over the last few years and eased the under-supply of housing for both owner occupiers and renters that had built up over the previous ten years.
“Multi-unit building, especially apartments in the Eastern States, has driven much of the growth in this cycle and is also forecast to lead the slowdown in new activity over the next couple of years. From their peak of 117,000 in this calendar year multi-unit commencements are expected to fall by over 40 per cent by 2018/19.
“A softer landing is forecast for detached homes with 103,000 starts predicted for 2018/19, down 9 per cent on the peak this year.
“The forecast falls in new activity will not be uniform across the country; Western Australia and South Australia started their down-cycle well in advance of other states."Total new commencements are forecast to decline 3.1 per cent, 18.5 per cent and 5.1 per cent over the period 2016/17 – 2018/19, which would take commencements to a trough of 172,242, which is the average for the last ten years.
“Actual building activity on the ground will not decline in the same way as new starts due to the substantial volume of work under construction that will not be completed until 2018 and into 2019," Mr Temby said.
“Dwelling renovations are forecast to grow over the forecast period counteracting some of the decline in the new home building activity. By 2018/19 renovations are forecasts to have grown by 6.5 per cent to be worth $32.96 billion in that year."