Housing construction to peak in 2014

Housing construction to peak in 2014

Posted on Friday, July 18 2014 at 12:20 PM

The Housing Industry Association (HIA) says detached housing construction numbers will peak in Australia this year.

The HIA-RP Data Residential Land Report shows a 4.7 per cent decline in residential land sales between
March 2013 and March 2014.

Harley Dale, chief economist at the HIA, says
the flow-on for construction can’t be ignored.

“There’s a close relationship between
residential land sales and detached house starts,” he says.

“The indication is that the upcycle in
detached housing will peak during 2014.”

Over the six months to March 2014,
residential land sales were still up by 5.9 per cent when compared to the
six-month period to March 2013.

In the March 2014 quarter the weighted median
price of residential lots increased by two per cent to $205,248, marking only
the second time the value has exceeded the $200,000 threshold.

Capital city lot prices increased by 3.3 per
cent in the quarter to be up by 7.5 per cent compared to the March 2013

Dale says the speeding up of land price
growth should be concerning.

“The upward trajectory for residential land
prices since mid-last year is steeper than it should be.

“There’s clearly a policy failure this cycle,
as in many before it, to ensure a supply of shovel-ready land commensurate with
the demand for new housing.”

Tim Lawless, a research director at RP Data,
says the results indicate house construction will not play as large a role in
the nation’s post-mining economy as first expected.

“Policy makers were placing a great deal of
importance on renewed levels of housing construction to act as a new pillar for
economic expansion,” Lawless says.

“While there has been uplift in approvals and
new housing starts, the trend towards fewer land sales since September last
year suggests that the housing construction cycle, at least for detached
housing, is close to peaking.”

Lawless has also expressed concern at the
results in light of strong property price growth in the New South Wales

“The ongoing rise in land prices at a time when
sales are falling is a worry, particularly in Sydney where the number of sales
over the March quarter was about level with the previous year but the median
price of land has moved 5.6 per cent higher over the year.”

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