Housing starts tumble but price rises set to draw buyers back
Official data out today found a massive -20pc slump in new building starts across the country, but Queensland may be in better shape than most.
Latest Australian Bureau of Statistics building activity data found the total number of dwelling units commenced in the private sector nationally shrank -20.3 per cent (Jun qtr 18 to Jun qtr 19) to 46,315.
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Most of that economic drag came off a downturn in other residential buildings (-26.3 per cent) though house commencements were also down (-16pc) nationally.
That came off falls everywhere during the 2018/19 financial year — barring ACT (+17.8pc) and Tasmania (+5.3pc) — with the downturn largest in NT (-28.4pc), South Australia (-22.6pc), Victoria (-17.8pc) and Western Australia (-14.3pc). Queensland (-13.9pc) and New South Wales (-13.1pc) were also in the red year on year.
But Brisbane economist Pete Wargent, co-founder of buyers agency AllenWargent Independent Property Buyers, said the figures were not surprising.
He said housing figures were stabilising though the impact on new apartment builds especially were expected to be a drag on the economy “for the next year to two”.
“I wouldn’t say it’s a particular surprise, plus it’s coming off a very high base,” he said, plus they covered a period impacted by uncertainty surrounding federal election policies.
“Since the election we’ve had three interest rate cuts and historically that has always driven investment in housing,” he said, “but you generally find the biggest influence is prices, that is if people see prices rising. If there’s uncertainty and prices falling that generally kills the construction cycle dead.”
“The lower interest rates will be one driver and APRA has removed some of the caps put in place on the volume of investors in the market so that could free up a bit more investment.”
He said Queensland was better placed in the property cycle for a rise now.
”There was a record construction boom and Queensland peaked a lot earlier than Sydney and Melbourne did so from that perspective we might be a bit ahead so things might pick up a bit quicker here. Confidence is key.”
He found buyer enquiries for Brisbane property were rising especially out of investors from the two major southern capitals.
“We have a buyers agency and the number of enquiries we get has picked up. We find investors from Sydney and Melbourne looking in the $500-750,000 range. People want to get a toehold.”
Housing Industry Association chief economist Tim Reardon said detached housing starts had slowed to their lowest level since December 2013.
He said “the impact of three cuts to interest rates and small fiscal stimulus has slowed the decline in work entering the pipeline”.
“A return to normal lending conditions would provide a boost to home building and the wider economy. Indications are that the downturn in new projects entering the pipeline are starting to improve following cuts to interest rate but the market is not yet at the bottom of this cycle.”
This as the latest Herron Todd White property market report, released Wednesday morning, found Brisbane offered “an extraordinarily good balance of property options for those building a diversified investment portfolio”.
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“Given some of the good news on the horizon around infrastructure investment and increasing interstate migration, there’s every chance Brisbane will be one of the country’s best performing capital city markets over the next three to five years.”
The report said along with low interest rates, Brisbane had seen a recovery in its rental market, which was good news for investors.
“Average rents are rising, albeit modestly, with vacancy rates tightening. This has something to do with the uptake of inner-city apartment oversupply. While there is still plenty of stock to be absorbed by the rental market, the numbers are better now than they were a few years back.”
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