ACIF’s forecasts point to a 12 per cent surge in nonresidential accommodation occurring through the so-called “room boom” – accommodation for tourism and international students. ACIF forecasters expect this category to continue to grow over the next four years. There is significant construction of education facilities from tertiary to primary schools, and even vertical schools where high rise apartments have created demand in inner suburbs of Sydney and Melbourne.
The forecasts also indicate an up-turn in aged-care and offices over the next two to three years. Approvals in agedcare facilities are expected to dip slightly with a return to growth next financial year. Several major new office projects are on the books for Melbourne and Sydney.
Strong retail trade, both in outlets and online, flows through to growth in non-residential building, with many renovations to attract consumers such as cafes and entertainment, and changes to warehousing and transport facilities. Industrial real estate construction represented 41% of commercial sales to April 2018, according to CoreLogic. The category is dominated by projects for warehouses, cargo sheds and distribution centres, predominately in Melbourne.
Changes to economic activity in each state are reflected in housing market cycles. Overall, residential commencements have been falling over the past two years. The down-turn tends to be lessened and spread over two to three years in Victoria, in part due to workers moving for employment, as well as immigration.
Other residential (apartments and townhouses) is expected to follow the decline seen in the house market. However, with continued population growth and an increase in higher density living, the sector will see a return in two to three years. Recent macro measures to control lending as a result of concerns of overheating in this category will be felt through to 2020, at least. An URBIS survey of developers in inner city areas reports a reduction in the volume of sales in all markets, except Melbourne. Sydney’s North West Middle ring and Parramatta are expected to see greater activity in the coming quarters. Brisbane’s Inner South and Inner West are selling well off the plan. In Perth, owner occupiers and local investors are aiding the recovery in the apartment market. The apartment market appears to be self-regulating, with a significant reduction in new projects in 2017 to avoid overcrowding the market. However, there is still strong demand for apartments that meet preferences for size and price in each city.■