Australia’s residential construction industry is set to continue its strong performance through 2015/16 according to the industry’s peak lobby group.


According to forecasts from the Housing Industry Association, the construction of new homes will remain elevated over the next year, while renovations increase in number too.


“New dwelling commencements will remain at very elevated levels in 2015/16 while the pace of recovery in renovations activity will accelerate,” HIA chief economist Harley Dale said. 


“It is from 2016/17 onwards that the industry risks a relatively sharp decline from record levels, highlighting the timeliness of renewing a focus on meaningful housing policy reforms,” Dr Dale said.


According to figures from the HIA, there 114,000 detached dwelling commencements during the full 2014/15 fiscal year and 97,850 commencements for other dwellings – a record amount for a 12-month period.


Across 2015/16, the HIA forecasts 200,300 total dwelling commencements, which represents a 5.5% decrease.


Commencements of detached housing are expected to be down by 4%, while other dwelling commencements will fall by 7.2%.


Beyond 2015/16 the contraction in detached dwelling commencements is forecast to be moderate


Detached dwellings commencements are forecast to decline by a further 5.2% in 2016/17, and then to ease back by 1.7% and 1.4% over the following two years to reach a cyclical low of 100,700 commencements in 2018/19.


Commencements of multi-unit dwellings are forecast to hit a low of 63,000 in 2018/19, with a 23.2% decline over 2016/17 leading the way.


While commencements have been high in recent years, the HIA said there is a sizeable backlog of approvals that haven’t been started yet, specifically in NSW where work on 17,000 dwellings has yet to begin.


That represents half of all dwellings approved but not yet commenced in Australia.


The relatively high levels of building that were seen across Australia during the late 1990s and early 2000s is expected to result in renovations becoming more prevalent as older housing stock is repaired.


During 2014/15, renovation activity increased by around 0.1% and a modest increase is predicted over the next few years.


This is projected to involve growth of 3.7% during 2015/16 followed by a flat 2016/17.


Growth is forecast to resume in 2017/18 at 1.6%, followed by a stronger 2018/19 with growth of 3.7%, with the volume of activity projected to reach $31.2 billion at that time.