January 2010

Australia's biggest building industry association is questioning the sustainability of new Bureau of Statistics figures suggesting the start of a recovery in residential building activity in the September 2009 quarter.

Housing Industry Association chief economist Dr Harley Dale says that while 2009/10 would be a healthier year for new residential construction, there were question marks over the sustainability of the up-cycle.

“First home buyer-related activity, the Social Housing Initiative and the lagged impact of very low mortgage rates will combine to generate growth in new residential work done in 2009/10. It remains unclear, however, whether the recovery can gather legs beyond this year in the face of persistent supply side obstacles, rising interest rates, and what to date is an insufficient number of upgrade buyers and investors to fill the void left by first time buyers."

Seasonally adjusted work done on new residential dwellings increased by 2.8% in the September 2009 quarter to an annualised value of A$36.3 billion. This was 3.9% down on the September 2008 quarter and over 9% lower than the previous cyclical peak seen back in early 2004. Work done on detached houses increased by 6.5% over the September 2009 quarter but work done on ‘other residential building’ dropped by 5.5%. Seasonally adjusted new residential work commenced in the September 2009 quarter increased by 5.8%, the first rise since mid 2008.

There was brighter news on the renovations front in the September 2009 quarter with a volume increase of nearly 4% following four successive declines. "This sector should continue to recover as labour market conditions improve further and gains in home prices bolster confidence,” says Dale.