Solid activity in residential development is forecast for next year as the industry comes off the back of building an unprecedented supply of new dwellings, a new report has revealed.
The RDC CoreLogic RP Data Australian Residential Development Outlook Spring Edition is a comprehensive report designed to provide highlights of the fundamental indicators for residential development in macro, fiscal, investment and housing activity.
Nick Proud, executive director of the Property Council of Australia’s Research Development Council (RDC), said that while some indicators have softened, the demand for new housing remains positive following rising household wealth, competitive financing costs and an increasing population.
“The expectations for low interest rates, reasonable ongoing foreign investment and an increasing population will continue to drive a fundamental demand for new homes to be built through 2016,” he said.
“In a vital sign for improving affordability, the indicators also show that residential supply nationally is finally meeting household formation requirements to create enough housing to satisfy growing demand. However, one good year doesn’t undo 10 years of underbuilding.”
Tim Lawless, head of research at CoreLogic RP Data, said that with investor lending winding back due to banks’ decreased appetite, new housing commencements – particularly apartments – will start to recede.
“In a welcome change for those looking to buy a home, the heat is expected to come out of housing price rises over the next year, as record supply begins to soak up the excess demand that has been there for some time,” he said.
“Housing prices across capital cities are shown to have risen by 57 to 138 per cent in the five-year period to 2005, and once they did that they went on to post 23 to 84 per cent gains in the next five-year period. However, it is fair to say that the days of a 15 to 30 per cent improvement in national house prices per year are now past.”
Mr Proud noted that while market indicators broadly support a continuing of strong levels of dwelling construction activity at least until mid-2016, the industry should not be complacent.
“The economy will rely on strong housing construction and so it is important that the right policy settings are introduced around planning for infrastructure and tax reform to maximise the ongoing positive impact of this industry on the country’s economic wellbeing,” he said.