The residential construction industry in Australia has benefited from a temporary bounce in activity as home buyers rushed to take advantage of home buyer incentive schemes before June 30, the latest data has shown.
On a seasonally adjusted basis, the overall number of housing starts throughout the country in the June quarter (34,116) was up by 4.6 per cent compared to the March quarter, according to figures from the Australian Bureau of Statistics.
But the increase, driven by a 19 per cent rise in multi-residential units, is being interpreted as a temporary pull-forward effect as buyers in Victoria and New South Wales made purchases to take advantage of home buyer incentives schemes prior to the expiration of those schemes on June 30.
Such a viewpoint is supported by a state-by-state breakdown, which shows a surge in seasonally adjusted starts in New South Wales, although Victoria saw only a much smaller rise of 2.8 per cent.
Now that the end of June has passed, industry participants fear starts will drop back again.
Indeed, despite the headline rise, the latest data serves to underscore persistent weakness in the sector. Outside of multi-residential units, detached housing starts dropped back 1.7 per cent and were 10.7 per cent lower than what they were in the June quarter last year. Furthermore, even with the headline rise in the multi-residential sector, overall starts were down 10.8 per cent year on year.
Not surprisingly, building groups were underwhelmed by the result. Housing Industry Association chief economist Harley Dale points out that in the past 15 years, there have been only two periods in which the number of dwelling unit starts throughout the country were lower than they were over the past financial year (138,852 starts) – when the GST was introduced and in 2009 during the worst of the financial crisis.
Master Builders Australia chief economist Peter Jones says the rise in June figures is ‘cold comfort’ for builders who continue to face difficult operating conditions, especially in light of weak forward indicators.
Jones says immediate policy action to stimulate recovery in the sector is required, including further interest rate cuts and the removal of policies that restrict supply such as poor land release strategies.
“The housing sector has been under-building for the past seven years and it is crucial that Australia’s residential building industry now embarks on a major growth phase to overcome the housing shortfall,” Jones says. “Urgent reform is required to address supply bottlenecks; otherwise a strong industry response to meet underlying demand cannot eventuate.”
Outside of New South Wales and Victoria, most states recorded a fall in starts in the June quarter, with the seasonally adjusted number of dwelling commencements falling in South Australia (down 9.3 per cent), Western Australia (down 6.1 per cent), Tasmania (down five per cent) and the Australian Capital Territory (down 0.09 per cent).
The story was better, however, in Queensland and Northern Territory, both of which are expecting strong housing recoveries after a period of under-building.
In the NT, starts jumped by a whopping 68 per cent to reach their second highest level in more than a decade. In Queensland, meanwhile, starts rose by a healthy 8.1 per cent.