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Home Construction to Slow in Australia

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Published on : Sep 01, 2015

From the recent high, housing construction is anticipated to slow down in the next few months due as rise in home prices softens. 

The approval for the construction of new housing rose more than 4.2% in July, which was a reverse trend from 5.2% increase in June. 

The surge was driven owing to the double-digit increase in the category for volatile multi-unit housing, which led to offset the dip in permission for detached homes. 

In the last 12 months ending In July, the approval for buildings rose by 13.4%, as stated by the Australian Bureau of Statistics, recently.

Tome Kennedy, an economist for JP Morgan stated that construction stayed robust but are expected to slow down gradually in the remaining months of the year.

He further stated that building approval has been happening at pretty good levels. Moreover, building approval activity has been continuing as the upbeat trend of 2014.

He further stated that housing construction activity is expected to lose momentum gradually.  

As stated by Craig James, CommSec chief economist the heavy lifting was done by the high-rise apartment category, with apartment buildings in blocks of for or more accounting for above a quarter of the approvals.

The chief economist further stated that the skylines of Melbourne and Sydney have already been transformed. 

On top of this, the home building boom is going to support the economy in the next 12 to 18 months. The benefit of this construction will be visible in Sydney, owing to the fact that construction of high-rise apartments take longer time duration. 

The head of research at CoreLogic RP Data, Tim Lawless stated that if home prices continued to decline, this would impact construction as fewer people would be interested for investing in housing due to less incentives.