A housing forecast has claimed the number of new homes being built will fall significantly unless serious reforms are made in the way building approvals are awarded.
The HIA's National Outlook report has shown declining levels of home construction, with new housing starts down 12.8% in 2011. In light of the decline, the group has forecast a further 5.9% drop for 2012 before a modest recovery in 2013/14.
"New home building has been hampered by interest rates that have been too high for too long as well as a glacial pace of reform in terms of the supply-side of the Australian housing market. Put simply, the excessive tax levied on new housing is constraining supply and is harming business conditions and therefore the wider domestic economy," HIA senior economist Andrew Harvey said.
Harvey again sounded the HIA's call for a rethink of stamp duties, saying around 40% of the purchase price of a new home is due to taxation.
"Given that a lack of housing affordability is already hurting those trying to get into home ownership, as a nation we should be building more homes, not fewer. More is needed in terms of Commonwealth and state government reform to lift some of the tax burden from new housing - taxes on housing simply have to be substantially reduced," he said.
Harvey also took aim at the RBA. He claimed the Reserve had "fallen into the trap" of keeping rates on hold.
"The economy is now posting zero employment growth, and the non-mining states are going backwards in terms of their labour markets - now is not the time to allow residential building to decline further," he said.
One bright spot for the group's housing outlook was the level of renovations taking place. As more people choose to improve their current home rather than upgrade, Harvey said an increase in renovations was set to continue.
"Although consumers are highly cautious at the moment, they are still spending on renovations, particularly on smaller jobs. We expect modest growth of 0.6% in 2011/12 and 0.7% in 2012/13, taking renovations investment to a record $30.36bn," Harvey said.
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