Has housing construction passed its peak?

Warning signs in new data suggest that housing construction has started to slow.

The Australian Bureau of Statistics data on building activity shows a 5.1 per cent fall in commencements in the December quarter, and a fall of 2.3 per cent on completions.

Numbers show the commencements and completions over the past 12 months remain at record highs – but the fall in starts and completions in the last quarter is revealing.

Building commencements throughout 2015 reached a record 220,887. However, in the December quarter commencements fell from 56,612 to 53,727.

Property Council’s chief of policy and housing Glenn Byres says there’s a real risk in these numbers that housing commencements and completions have peaked and could turn south.

“It’s the last thing we need at a time when housing construction is crucial to economic prosperity and we’ve got chronic undersupply in our major capital cities,” he says.

“While Australia’s largest state, New South Wales, had the largest increase in commencements throughout 2015 (up 19.1 per cent for the year), the 14.0 per cent fall in the December quarter is a marker for concern. It’s a reminder that NSW needs to get cracking and fix up its planning system, which is still the most dysfunctional in the nation.

“We need policy solutions in place that reduce the time, cost and red tape on projects and make it easier to deliver a sustained period of strong supply. Stronger supply will improve affordability, which is vital for homebuyers.

“This data is a reminder about the important role property construction plays throughout the economy. It’s why we are so concerned about dramatic changes to negative gearing and capital gains tax.

“These changes are not just a risk to housing construction; they are a risk to jobs and growth.”

Latest building figures from Master Builders show building approvals up almost 10 per cent in Queensland, an improvement on the previous two months.

Master Builders deputy executive director Paul Bidwell says the February increase was due almost entirely to approvals in the southeast of the state.

“Building approvals are still up across the past 12 months and I’m confident that detached housing will continue to grow long-term, but believe the investor-led boom in unit approvals is waning,” Bidwell says.

Month-on-month in the regions, Brisbane was up 38 per cent, the Sunshine Coast rose 45.7 per cent and the Gold Coast increased by five per cent.

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