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Construction set to deliver thriving economy

By Catherine Rayward

The Property Council of Australia recently announced that record levels of construction across the country are expected to continue throughout the 2016 financial year. This is great news on so many levels! Not only does this mean continued support for local businesses, builders and contractors, but also a prop for the economy and a shot in the arm for housing supply.

Master Builders Australia has also unearthed some solid evidence which supports the claim by the Property Council. According to data from the Australian Bureau of Statistics (ABS), housing construction work completed jumped up significantly over the March quarter, as did renovations – which rose 4.3 per cent.

“The latest data shows that residential building continues to play a crucial role in the economy as the expected decline in mining related engineering construction continues,” said Wilhelm Harnisch, CEO of Master Builders.

Mr Harnisch went on to note that commercial real estate activity has also risen, possibly due to business-friendly measures in the federal government. A one per cent rise in commercial construction work in the month of March is a good sign for businesses, investors and builders alike.

Development Outlook

The Australian Residential Development Outlook – budget edition – was released this month by the Property Council in association with CoreLogic RP Data and the Residential Development Council. In the report you can find details on just about every factor that influences property development and investment – whether you’re talking about rental properties or homes for sale, this report is a must read.

Amongst other things, the Property Council predicts that current record levels of activity in the construction sector will remain in place throughout the 2016 financial year. Just how much of a difference does this make to national housing supply? Around 30,000 to 40,000 homes on top of the long run average production, according to executive director of residential Nick Proud.

“Recent improvements in new housing supply are expected to continue, adding tens of thousands of homes for Australian families and easing pricing pressures to improve affordability,” Mr Proud said in a 26 May statement.

On May 21, Tim Lawless pointed out that this extra capacity could soon be snapped up by eager buyers looking for houses for sale, as historically low interest rates are fuelling the flames.

“We are likely to see further stimulus to buyer demand from the low mortgage rate environment. With mortgage rates at historic lows, and potentially moving even lower later in the year we may see transaction numbers rebound after the number of home sales slowed in late 2014.”

However, Mr Lawless also noted that the types of buyer relief bandied around in the common media might not be the solution they are cracked up to be. Rather, he suggests a different route to dealing with the affordability of real estate in Australia.

“The key to better affordability is likely to be found in a supply side response rather than stoking housing demand via grants or concessions or by allowing access to new funding sources such as superannuation,” he said.

As Australia prepares to enter into a new financial year, with a fresh federal budget and infrastructure audit in hand, it’s important that investment in the nation’s housing supply is on the agenda. However, large aggregate numbers like this shouldn’t give the impression that the whole country is succeeding with flying colours. Each state is dealing with the windup of the resource boom in different ways, and it’s important that all three levels of government deal with land supply and property tax issues in order to get each part of the country on a solid footing again.

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