Changing lifestyle desires mean that apartments are leading the way in a record-breaking recovery in home building, which is set to last for another two years.
Industry analyst BIS Shrapnel’s latest report forecasts that residential building activity will reach a new high nationwide (of 190,000 new builds) over 2014/15 – and that many of those new homes will be in apartment blocks.
The Building in Australia 2014-2029
report gives pent-up demand from recent strong population growth, along with the lowest interest rates in 50 years, as the reason for this outlook.
BIS Shrapnel associate director Dr Kim Hawtrey said that Australia’s rapid population growth rate of 1.7% per annum was translating into strong demand for new dwellings, which was expected to continue into 2015/16.
Home building had not kept pace with population growth for many years and this meant that there was a national dwelling stock deficiency of around 100,000 dwellings.
It would take the next five years to eliminate the unmet demand for housing, which meant he didn’t see the housing shortfall closing until 2018, Hawtrey said.
”In the next two years we’ll also see the recent emphasis on high-rise units continue. Currently two high-rise apartments are being built for every five detached houses, which is double the historical rate of one apartment for every five houses built.”
However, the residential recovery was now moving beyond high-rise apartments to include detached houses, and beyond the major cities to incorporate regional areas.
New South Wales (9% growth in housing starts forecast for 2014/15) and Queensland (3% growth forecast for 2014/15) were driving the growth.
This was thanks to strengthening local economies, underlying pressure from mounting stock deficiencies and investor demand.
Growth (of 3%) was expected for Victoria over 2014/15, but there has been over-building relative to demand. This meant there would be a slowdown due to oversupply in about 12 months.
Meanwhile, Western Australia’s ride on the momentum from the mining boom was turning and the state was forecast to record a fall of 5% in housing starts in 2014/15.
Hawtrey said that it was investors and upgraders/downsizers who were driving demand in the cycle.
”But the improved conditions are yet to either stimulate significant gains in alterations and additions activity, or gather up first home buyers, and these segments of the market remain a concern.”
Hawtrey added that natural cyclical factors would lead to a correction in the cycle during 2016/17 (-10%) and 2017/18 (-12%), with growth set to resume in 2018/19.
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