Australia's domestic economy would have been "considerably weaker" over recent years without the contribution from the new home building sector, according to the Housing Institution of Australia (HIA).
HIA Chief Economist Dr Harley Dale said the national new home building sector had made an "outstanding contribution" to overall economic activity in Australia over the last four years, as the latest Housing Industry Association National Outlook demonstrated.
“Looking beyond the current cycle, a strong focus on housing supply and policy reform is crucial to Australia’s future economic and social prosperity as we look to successfully house a growing and ageing population, along the way reducing pressures on the nation’s burgeoning health budget,” said Dr Dale.
“Australia will fail to achieve this objective without federal government leadership and involvement in housing policy reform, including strategic planning for the future housing and residential infrastructure requirements of our growing and ageing population.
“Tinkering with negative gearing and capital gains tax provisions doesn’t represent real reform, but risks damaging confidence towards the housing industry at a crucial juncture in the cycle. A key finding in the latest HIA National Outlook is that a peak in new home building activity will be followed by a significant cyclical downturn extending to 2017/18.”
New dwelling commencements are forecast to decline from a record peak of 220,000 last year to a trough of around 160,000 in 2017/18, while the growth in residential property prices will continue to slow.
“The outlook for renovations investment, which is recovering from a 12 year low, is looking a little brighter,” said Dr Dale.
“Having grown by just 0.9 per cent during the 2014/15 financial year, renovations investment is forecast to grow by 2.8 per cent in 2015/16. Growth is anticipated to increase by a further 1.7 per cent in 2016/17, with activity then projected to see modest yet steady increases out to the end of the decade.
“This outlook for the renovations sector doesn’t look like shooting the lights out, but it is considerably more promising than what we have faced for some years now.
“As with the new home building outlook, if we delve below the national surface there will continue to be a wide divergence in conditions for renovations activity across states and territories over coming years.”