A new nationwide forecast high of 190,000 new builds for 2014/15 is the latest data from the Building in Australia (BIA) 2014-2029 report.
This is a record breaking figure which surpasses the 1994 high of 187,000 new builds.
The BIA report attributes pent-up demand from strong population growth in addition to the lowest interest rates in 50 years for this activity.
Australia’s rapid population growth rate of 1.7% per annum is converting into strong demand for new dwellings and is expected to continue in 2015/16. Although, it needs to be acknowledged that the population growth is expected to slow to 1.18% by 2017/18.
The two key states that have been driving this upswing are New South Wales and Queensland.
New South Wales is expected to account for more than 9% growth in housing starts for the next two years, and Queensland for more than 3%.
Victoria is expected to see a 3% growth over the 2014/15 period, however there has been over-supply relative to demand. This means there might be a slowdown due to oversupply in about 12 months.
Meanwhile, Western Australia’s mining boom ride was turning and the state was forecast to record a fall of 5% in housing starts in 2014/15.
The recent emphasis on high-rise units is reported to continue for the next two years. This could be linked to the strong change to lifestyle choices and affordability which is predominately showing that apartments are leading the way.
Currently two-high rise apartments are being built for every five detached houses. Historically the rate was one apartment for every five houses built.
The BIA report highlights that home building has not kept pace with population growth for many years.
It is estimated that there is a national dwelling stock deficiency of around 100,000 dwellings. This is based on the BIS Shrapnel assumptions about household formation per thousand head of population.
The current property cycle demand is being driven by investors, upgraders and downsizers and seems to have left first home buyers in the backseat of this housing boom. It is estimated that it will take the next five years to close this housing shortfall and eliminate the unmet demand.
Although the market has seen improvement, it is still yet to stimulate significant gains in alterations and additions activity, or gather up first home buyers. These segments of the market remain a concern for the industry.
It is estimated that the natural cyclical factors will correct the cycle during 2016/17 – 2017/08 and 2017/18, with growth set to pick-up in 2018/19.