Building activity drop
Forecasting sees sharp falls on the horizon
BUILDING activity is set to drop at the fastest pace since the global financial crisis as high land costs, slowing migration and falling investor demand weigh on the nation’s housing sector, new research has warned.
The value of building commencements, both residential and non-residential, rose 5 per cent to $118.5 billion in the 2018 financial year, a report from BIS Oxford Economics said. But the research house has warned building starts look set to fall by 10 per cent over the next two years.
Residential building starts look set to be the hardest hit, forecast to fall 23 per cent, with investor-driven apartments down 50 per cent, the researcher’s Building in Australia 2018-2033 report says.
“The building sector is switching from being a strong growth driver to a drag on the economy,” BIS Oxford Economics construction associate director Adrian Hart said.
“The very mild drop in residential commencements in 2017-18 is just the beginning.”
Falling investor demand, tougher lending standards and higher taxes on foreign buyers, combined with rising supply, were weighing on prices, Mr Hart said.
But it was not all bad news on the housing front.
As investors dropped out of the market, first-home buyers, upgraders and downsizers would have more opportunities, Mr Hart said.
States with the biggest increases in dwelling starts in recent years are set for the sharpest drops, he warned.
Victoria is set to lead the way with a 29 per cent plunge over the next two years.
NSW will post a 26 per cent fall and Queensland a 15 per cent decline, BIS Oxford predicts.
While building activity will fall, it will still settle at a higher level than any year before 2014 because of population growth and an improving economy, the report says.
Non-residential building activity will also remain strong and looks set to rise 5 per cent over the next two years as office, defence and prison projects get out of the ground.
But that rise will not be enough to offset the sharp falls in non-residential building, leading to an overall fall of 10 per cent in the value of building starts.