Tough times set to continue

By Reporter 26 August 2015 | 1 minute read

Investment in new housing stock is set to decline within the next two years, and the national economy will continue to soften in the wake of declining mining activity, according to a new report.

toughening investment

Economic forecaster BIS Shrapnel has predicted that the Australian economy is due for another three years of sluggish growth, as the consequences of the end of the mining boom are fully absorbed.

The prediction was made in the company’s Long Term Forecasts 2015-2030 report, released this week.

The report covered investment activity in various sections of the Australian economy, including the housing sector.

It notes that while investment in new dwellings is currently enjoying an upswing, activity is set to cool over the next 18 months.

“With the expectation of low interest rates for an extended period, and a growing deficiency of stock, a solid increase in dwellings building is now well under way and will build momentum from here,” a news release from BIS Shrapnel stated.

However, this level of activity will not be long lived and is likely to be isolated to states experiencing ‘sizeable stock deficiencies’ – including New South Wales and Queensland.

“There are another 18 months of strong residential building along with improved alterations and additions activity before the current dwelling investment cycle runs out of puff,” the release states.

Speaking more broadly, the company warned that recent signs of a softening Australian economy are indicative of a longer-term slowdown, which may last as long as three years, as the shock of a substantial fall in mining investment is fully realised.

Looking further afield to the next five years, the company predicted a rebound to GDP growth average, although the recovery may not be widespread.

“The next three years will be tough for parts of the economy as the country makes the structural shifts required,” BIS Shrapnel associate director of economics Richard Robinson said, “and a return to competitiveness will not be uniform across the country."

Despite the negative outlook, and the results from the most recent quarter, Mr Robinson dismissed speculation over a recession.

“In the immediate term, growth in the 2015 June quarter may have been a small negative, which will alarm many pundits, and spark talk of a recession,” said Robinson. “If the June quarter growth is around zero, then through-the-year growth will be around 1.7 per cent [June quarter 2015 compared to June quarter 2014].

“But we believe this quarter will be a blip on the radar. The economy will recover over the next two quarters – albeit while remaining soft.”

Read more: 

Hidden tax boosting property values 

The other type of property investment 

5 keys to successful property investment

Investors need to reconsider tenant expectations 


Tough times set to continue
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