Apartments to lead the way in home building fall

Adam Smith 23 November 2016

apartment graph drawApartments are set to suffer the greatest declines in a predicted drop-off in home building.

The Housing Industry Association (HIA) National Outlook report has predicted a slowdown in home building to what the association has touted as a “healthy level of activity”. HIA acting chief economist Warwick Temby has said home building is set to come off an “unprecedented” peak.

“Notwithstanding the current uncertainties around the broader economic outlook, especially with the future US policy settings up in the air, HIA is forecasting a measured return to more normal levels of building activity over the next couple of years,” Temby said.

Normal levels, the HIA suggested, would equate to a 9% decline for detached house construction for 2018/19. Apartment building, however, is set to see a far more dramatic decline.

Apartment investors could suffer

“Multi-unit building, especially apartments in the Eastern States, has driven much of the growth in this cycle and is also forecast to lead the slowdown in new activity over the next couple of years. From their peak of 117,000 in this calendar year multi-unit commencements are expected to fall by over 40% by 2018/19,” Temby said.

Temby said total commencements are expected to decline to a “trough” of 172,242 by 2018/19, which he said was the average of the last decade.

“Actual building activity on the ground will not decline in the same way as new starts due to the substantial volume of work under construction that will not be completed until 2018 and into 2019,” Tremby said.

Renovations, meanwhile, could counteract the decline in new home building. Tremby said renovations were predicted to grow by 6.5% by 2018/19.

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