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New Home Starts In Australia Ride To All Time High

News Posted On: 06 February 2015

Australians began building more new homes in the September quarter of 2014 than in any other quarter since records began. The Australian Bureau of Statistics released data showing that detached dwelling commencements rose by 0.8% during the third quarter of 2014, while ‘other dwellings,’ primarily multi-unit dwellings, rose by 30.2%. The total number of dwellings that began construction rose 12.5% to reach a new record of 52,380.

Australia’s four largest states – New South Wales, Victoria, Queensland and Western Australia – all showed their strongest quarters on record for building activity, showing that the phenomenon isn’t isolated to a single region but represents a countrywide trend.

Breaking the figures down by region confirms that the trend may have been nationwide but some areas have yet to benefit from it. In New South Wales, building climbed by 30.7%, in Victoria by 0.9% and in Queensland by 18.1%, while Western Australia saw a 5.1% increase, Tasmania 2.9% and Northern Territory 9.6%. The ACT building rate rose by 22.8%; only in South Australia did building rates fall, by 5.7%.

In Australia, the concern is always going to be a housing market that booms in Sydney and Melbourne and slumps across other areas of the country, and in fact it’s easy to see that Australia’s building boom is strongly focussed on Sydney’s home state, New South Wales. However, a Sydney-focussed narrative doesn’t explain why Western Australia, on the other side of the country and home to expanding Perth, should benefit from such a high build start rate. The increase in build starts is focussed on capital cities, for now – and it is partly explained by ‘a substantial accumulation of multi-unit residential building projects that had obtained approval but did not commence construction,’ as Shane Garrett explains; but it’s multiregional.

Mr Garrett, senior economist for the Housing Industry Association, said, ‘part of the particularly strong September result can be attributed to a catch-up after the rather disappointing result in the June quarter, when the number of starts fell well short of expectations.’ Overall, though, the data from the ABS ‘confirms that residential building activity was tracking along at a very strong level during 2014,’ Mr Garrett continued.

Across Australia, it’s obvious that business sentiment sees the property market accelerating too. A report from ANZ and the Property Council showed a slight drop in business confidence in the housing market, but on average property professionals reported confidence of 132 – with anything over 100 being ‘positive.’

That’s affecting housing affordability across the country, though. The news of increasing building activity comes even as many of Australia’s capital cities are struggling with an undersupply problem, with rents in some areas at record highs. Victoria is recruiting housing organizations to help it meet demand for affordable housing and the national vacancy rate is just 2.4%, showing very little slack in the system. Right now, the best hope for finding affordable housing lies in Karratha, officially Australia’s most affordable town. As the new builds come on the market, we can expect some easing of the supply problem but prices may not fall, since Australia’s population is rising.

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