The forecast was released in May by ACIF, the peak consultative body for building and construction, which releases such updates twice a year.
The ACIF Forecasts for May 2017 show that residential building is in the middle of a boom, which has pushed growth beyond housing fundamentals, meaning a downturn is on its way. Meanwhile the end of the mining investment boom continues to slow economic growth, which is tracking below the longer-term average. And the much awaited strengthening in non-mining business investment remains elusive.
The data shows residential investment has provided one of few sources of growth in activity and employment in recent years.
However firmer prudential supervision is targeting the emerging risks in mortgage lending, sharply restricting credit growth and raising interest rates for investors and developers. There are indications that these measures have already taken some of the pressure out of rising house prices and they are adding to expectations of a downturn in investment in new housing, especially development of apartments in inner city areas. In particular, indicators show that growth has peaked in the New Other Residential sector (flats, apartments and townhouses). Growth in Residential Building at large is projected to fall to 4% this year (2016-17). Activity will contract by a total of 16% over the three years to 2018-19.
Significantly, the forecast notes that “the Australian Government’s 2017 Budget provided many measures designed to tackle problems with housing affordability.”
“These will take some time to flow through to actual Residential Building activity and it is likely that they will provide a lift in supply and assist in funding demand for more affordable housing from 2017-18, just when the Residential Building activity would otherwise be entering its expected downturn in earnest. It is too early to say in this set of ACIF Forecasts how much this will change the projections.”
ACIF Forecasts are available as the ‘Australian Construction Market Report’, and detailed numbers are available by subscribing to the Customised Forecasts Dashboard. More information about ACIF is available at www.acif.com.au/forecasts.