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New home building confounds expectations

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“The short term outlook for new home building in Australia has improved significantly as a result of very healthy conditions in the jobs market and robust population growth,” stated Shane Garrett, HIA Senior Economist.

The HIA’s latest forecasts for residential building are revealed in its updated set of State and National Outlook reports. The flagship reports include updated forecasts for new home building and renovations activity for each of the eight states and territories.

“The big story of recent months is the resilience shown by the detached house building side of the market. Detached house starts touched very elevated levels during the back end of 2017, and latest building approvals data indicate that things are set to remain strong here for a few more months.

“The demand for new house building continues to be supported by very robust gains in population, as well as the pace at which new jobs are currently being delivered by the labour market.

“New home starts reached record levels during 2016 with latest ABS data indicating that there was a fall of 7.9 per cent in new home commencements during 2017.

“The overall reduction in new home building activity in 2017 was caused by the imposition of additional taxes on foreign buyers looking to acquire newly-built homes. The tightening up of regulations and financing conditions has also placed pressure on new home building activity – particularly apartments.

“Despite the strength of population growth, we expect that these regulatory factors will place a drag on new home building activity over the next few years and that the bottoming out point will be reached in 2020.

“By then, it is expected that a considerable well of pent-up demand for housing will emerge and fuel renewed expansion in new home building activity,” concluded Shane Garrett.

Source: HIA

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