House building to drop beyond mid 2016

10_House building to drop beyond mid 2016

Lucy Hughes Jones

Sydney

(Australian Associated Press)

Economists are tipping a smooth landing for the housing sector in the new year, but warn there are bigger risks for 2016/17.

After three consecutive years of growth in which new home building reached a record high of nearly 212,000 in 2014/15, the Housing Industry Association predicts moderate declines next year.

“(But) in 2015/16 there’s enough pent-up demand and work in the pipeline that it should be a very healthy year,” HIA chief economist Harley Dale says.

New home starts are forecast to exceed 200,000 in 2015/16 and should hold up at an annualised level above 180,000 for the 2016 calendar year, HIA says.

And while there is downward momentum in nine of the 13 variables in the HIA/ACI Housing Indicator Profile, they’re coming off in a fairly measured way, Mr Dale said.

“None of the leading indicators is falling off a cliff,” he said.

“The heavily-populated markets in Australia look as though they’ve got some juice in them going into the new year.”

But things don’t look as rosy beyond mid 2016.

HIA expects housing commencements to drop by around 15 per cent in 2016/17.

Mr Dale said at that point the population growth impact of slowing net overseas migration will start to bite.

“And we may well be seeing talk of rising interest rates which will have an adverse impact on confidence,” he said.

“We probably are going to see two or three years where the industry comes off quite sharply compared to the record levels we currently have.”

National Australia Bank economists expect property price growth to be significantly more subdued in 2016 and won’t provide the same support to household spending and the wider economy.

“(But) the contribution to GDP growth will remain positive (at) 0.3 percentage points in 2016, relative to 0.4 percentage points in 2015,” they said.

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