Building sector faces tough year

THE apartment and house building sectors are set to be two of the worst hit over the coming year as developers defer projects and mortgage rates rise, new research shows.

But solid population growth would put a floor under the falls in the detached housing sector and ensure demand, according to an IBIS World report.

The research comes amid a weakening market for established houses, after the bank regulator clamped down on lending to investors and risky borrowers and buyers dropped out of the market exhausted by sky-high prices.

A survey from the Australian Industry Group also found apartment building was in retreat while house building was stable last month, while a sharp drop in additions to the apartment pipeline loomed.

Apartment and townhouse construction revenue is set to slump 17.3 per cent to $21.17 billion in fiscal 2019, as developers respond to a build-up of unsold stock by deferring projects, IBIS World said.

“The recent completion of major apartment developments has contributed to ex- cess supply in several capital cities, notably Melbourne and Brisbane, which is likely to dampen investment until vacancy rates gradually ease,” the report said.

“The scaling back of investment is also expected to coincide with weaker investment from Asia in the local real estate market, which is due to the tightening of mortgage lending practices to foreign residents by the local banks, and the imposition of additional land taxes on foreign investors.”

Other sectors set for downturn include building societies, where revenue is expected to fall 14.4 per cent amid competition from national banks, and video game, DVD and recorded music retailing, tipped to fall 7.9 per cent as consumers increasingly buy online.

Revenue in the intellectual property leasing sector, covering patents, trademarks, spectrum and other intangible property, is expected to soar 68.2 per cent to $4.75 billion as the government auctions off new spectrum capacity.

Internet publishing is set for 16.5 per cent revenue growth on the back of expansion of video and music streaming services like Netflix and Spotify.