Australia’s building commencements are set for a deeper cycle than previously forecast, according to BIS Oxford Economics’ Building in Australia 2019-2034 report.
The real value of national building commencements contracted an estimated 12% in 2018-19 from the record peak last year, according to the report.
The forecast predicted another 8% fall for 2019-20, with the drop in residential building outpacing the growth expected in the non-residential sector, the report showed.
Tougher lending practices and falling property values threatened demand for new properties. The premium paid for new property makes it particularly sensitive to contraction, according to the report.
“FY 2019-20 should represent the trough for total building, with a strong rebound anticipated from 2020-21 onwards as interest rate cuts, easing mortgage serviceability tests and first home buyer stimulus help facilitate a broad recovery. Total building activity is anticipated to climb near its previous peak over the coming five years,” said Robert Mellor, Managing Director at BIS Oxford Economics.
Attached dwelling construction was estimated to have a 24% decline, while houses dropped 9%. However, Tasmania and ACT defied the trend, offsetting some of the falls in total dwelling commencements, the report showed.
The national rate of property turnover significantly fell over the past two years, in line with falling house prices. Tighter lending conditions battered buyer confidence and restricted access to finance, according to the report.
National residential commencements will trough at 152,900 dwellings, despite the downturn, according to the report.
Over the four years to 2023-24, dwelling commencements were predicted to climb to a cumulative 55% to a peak of 236,650 in 2023-24. This new record level was projected to be the peak of the cycle, the report showed.
The value of non-residential commencement will also hold a record base of around $47bn per annum through to 2022-23, with both private and public sector demand contributing to the positive outlook, according to the report.
NSW and Queensland will climb to record levels over the next two years, while continued tightness in the Sydney office market should enable the sector to run at a high level, the report showed.
