Building industry begins slow recovery

Posted on February 24, 2009 by peter 
Filed under Australia Real Estate News · Tagged:

WORK will start on an extra 26,000 homes over the next two years as the building industry slowly lifts from the bottom of the cycle.

But 2008-09 looks bleak for builders, with sods expected to be turned on only 132,190 homes, 17 per cent fewer than the previous year and 50,000 fewer than underlying demand, according to the Housing Industry Association’s national outlook, released yesterday.

Queensland has been hit particularly hard by the weakening economy.

“Tasmania, South Australia and the Australian Capital Territory all look to be riding out these tough times a little better than their larger state rivals,” the HIA report said.

Housing starts are expected to rise to 149,150 in 2009-10 and 158,100 in 2010-11, according to the peak industry body.

HIA chief economist Harley Dale said: “The first-home owners’ boost, mortgage rates at a 40-year low, and the housing components of the federal Government’s national building and jobs plan have the capacity to deliver a moderate recovery in residential activity.”

Earlier this month, the Reserve Bank cut official interest rates to 3.25 per cent, a 45-year low, wiping four percentage points off since September.

“Current housing conditions remain very weak, notwithstanding some spark from the first-home buyer market,” Mr Dale said.

Last week, the HIA said housing affordability for first-home buyers was at its best compared with any time in the past five years. However, it warned rising unemployment posed the biggest risk to a housing market recovery.

The HIA said a worst-case scenario would be the nation’s jobless rate reaching 9 per cent. This would depress the number of housing starts and lengthen any recovery.

The value of property sold at auction is down drastically despite auction clearance rates remaining solid.

In Sydney last weekend, 63.9 per cent of homes sold at auction, for a total of $94.9million. This compared with a clearance rate of 56.3 per cent, but $238.3million worth of property, a year ago, according to researcher Australian Property Monitors.

In Melbourne, $34 million worth of homes sold at auction last weekend compared with $352.1 million a year ago with clearance rates of 73.9 per cent and 70.1 per cent respectively.

For the renovation sector, which accounts for 47 per cent of the money spent in the housing industry, spending was expected to be flat in 2008-09, the HIA said.

Renovation spending was expected to total $32 billion in 2010-11, compared with its previous record of $30 billion in 2007-08, the HIA said.

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