High rates of population growth, heightened levels of new construction activity and continued jobs growth is good news for Australia’s housing market outlook for 2018.
The Housing Industry Association’s National Outlook predicts a strong year for housing despite dampening investor and building activity.
HIA principal economist Tim Reardon said the supply of new housing is closer to meeting the demand for housing in the first time since 2003.
“The enormous pent-up demand for housing in east-coast metropolitan areas is finally being met by a record supply of new apartments.”
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“The boom in apartment building has already started to calm but with population growth remaining high, buoyed by strong overseas migration, we expect that demand for housing will remain at elevated levels for the next few years.”HIA principal economist Tim Reardon
Reardon describes the noticeable withdrawal of investors from the market while being replaced by first home buyers as “a defining characteristic.”
“Investor activity in the housing market is continuing to cool as a consequence of punitive taxes and regulatory imposts on investors, but they are being replaced by first home buyers who have entered the market off the back of state government incentives,” he says.
Government interventions into the market recently include: state governments imposing punitive Stamp Duty charges on foreign buyers, federal charges for foreign purchasers, a new set of visa rules that could slow overseas migration, restricting lending to domestic investors and new regulations limiting interest only lending.
While Reardon said building activity would decline modestly over a number of years, he predicted this would bottom out in 2019 with “activity still at old levels".
Related reading: Australia’s Construction Sector Continues to Expand into 2018
Strong levels of population growth, particularly in Australia’s eastern states, has boosted an otherwise lacklustre housing market.
While Australia has strong population growth per capita compared to the rest of the world, an ageing population means natural increases in its population are well below a growth figure.
HIA managing director Shane Goodwin said that strong migration is critical to make up the shortfall.
Goodwin said Australia needs to promote and maintain a population growth rate sufficient enough to secure continuing growth in Australia’s economic performance, workforce capacity, national productivity and standard of living.
“At a time when Australia’s population is ageing and skilled tradespeople are in incredibly short supply the Australian government should not entertain the idea of winding back skilled migration based on a false assumption that it will somehow address housing affordability,” Goodwin said.