New house construction will fall this year

The Housing Industry Association predicts 25,000 fewer homes will be built in 2011 than 2010,  as interest rates and poor affordability wipe out recent stimulus-driven gains.

“Housing starts are forecast to fall by 15 per cent to a level of 143,430 in 2011, wiping out a majority of the short-lived, stimulus driven gains of last year,” HIA chief economist Harley Dale said in a statement.The HIA wants the federal government to introduce further stimulus measures to boost new housing starts so they don’t fall back to 2009 global financial crisis levels and  also wants the government to appoint a minister responsible for fixing Australia’s housing shortage and review taxes charged on new home construction.

Dr Dale said housing starts had risen in just two out of the past 10 years – 2002 and 2010.

A significant decline in new home building in Victoria, formerly the “shining light of residential building”, was a major contributor to the poor outlook, Dr Dale said.

“We are forecasting a 19 per cent fall (in Victoria) from these dizzying heights, to 48,170 starts in 2011,” he said. Queensland’s residential building market, the weakest in Australia, is forecast to fall 20 per cent in 2011.

NSW housing starts are forecast to fall 4 per cent in 2011, on top of a current shortfall of 15,000 dwellings per year. Western Australia would face its fourth decline in five years, due to a shortage of readily available land and the need for policy reform, HIA said.

South Australia, Tasmania, the ACT and the Northern Territory were all expected to see declines in new home construction in 2011.

HIA said this would flow through to growth in renovations activity, which hit nearly $32 billion in 2010.  “We expect activity in the renovations sector to hold largely steady this financial year, which would be a good outcome,” Dr Dale said.


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