The chief economist for a construction advocacy group has warned that new home supply is up against its hardest year in nearly a decade.
Shane Garrett, chief economist at Master Builders Australia, said new supply is likely to decline to 210,000 during financial year 2018–19, then to 197,500 in 2019–20 and then 175,900 by 2022–23, which is not a good sign.
“New home building across Australia is facing into its toughest year in almost a decade with declining house prices and the fallout from the royal commission really starting to bite,” Mr Garrett said.
“New home building was lifted to record levels in the middle of the decade by a combination of strong population growth, big house price gains, super low interest rates and keen demand from foreign buyers.
“Several of the ingredients that made up this favourable mix are no longer in place. House prices have seen sizeable reductions in a number of key markets, while state governments have erected prohibitive barriers to foreign buyers.”
The reaction to the banking royal commission has slowed the circulation of mortgage credit for property, he continued, claiming it is the biggest factor holding back the property market, followed by the uncertainty in housing policy leading up to the upcoming federal election.
Housing conditions however are not all bad, Mr Garrett said,
“The fundamentals of the Australian economy are actually pretty solid at the moment with the robust labour market fuelling a healthy pace of migration-driven population growth.
As a result, the underlying demand for new home building is still elevated but unfortunately this is not being translated into stronger activity on the ground because of the credit crunch and decision paralysis ahead of the election.
“It is vital that we get urgent clarity from all parties on exactly what they will do once the federal election has been concluded.”