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Building supply solid amid ‘unfolding credit crunch’

By Sasha Karen 28 November 2018 | 1 minute read

One chief economist has highlighted the resilience of the home-building market despite warnings over significant reductions in the availability of credit.

House under construction

Analysis of ABS data by Master Builders Australia’s chief economist Shane Garrett has revealed new residential building work has declined by 1.8 per cent for the quarter, but is up by 4.7 per cent for the year, which Mr Garret believes is a positive sign.

“Surprisingly, the apartment/unit side of the market put in a strong performance and came close to surpassing its busiest quarter on record,” Mr Garrett said.

As Mr Garrett explained to Smart Property Investment, this slight decline should not worry property investors. In fact, in some contexts, it could be a favourable thing.

“The supply situation from the point of view from investors is quite favourable at the moment, especially now if you consider house prices for example in Sydney and Melbourne are lower than say, this time last year, it makes them a bit more attractive and more affordable for investors entering into the market,” Mr Garrett said.

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Instead, he said what should be concerning investors at the moment is securing finance.

“Probably the biggest challenge for investors is finance availability because with the royal commission going on and so forth, the banks have been making it more difficult, especially for investors to receive financing for dwelling and real estate purchases,” Mr Garrett said.

“That’s where the greatest challenge lies, but supply conditions are relatively abundant at the current time both in terms of the number of new homes being built and being made available to the market and also the very large available stock of second hand or existing dwellings as well.”

He added that the current conditions are also favourable for investors who are interested in rental incomes due to both the number of people employed, especially full-time employees and population growth being strong.

Meanwhile construction work on detached houses declined by 3.2 per cent when compared with the previous quarter.

“The performance of residential building has proven more resilient than expected in light of the unfolding credit crunch and less favourable conditions in Australia’s largest housing markets,” Mr Garrett said.

“Going forward, we do expect the tougher financial environment to take its toll on the volume of new home building over the next few years. Larger apartment projects will probably see the biggest reduction.

“With the federal budget set [to be] be delivered earlier next year, it is important that it includes measures to support our sector’s capacity to meet the building needs of a steadily growing population.”

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Building supply solid amid ‘unfolding credit crunch’
House under construction
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