Australian Residential Outlook Optimistic In 2016

The RDC CoreLogic RP Data Australian Residential Development Outlook Spring Edition, released today, forecasts solid activity in 2016 as the industry comes off the back of building an unprecedented supply of new dwellings.

The Australian Residential Development Outlook is a comprehensive report that provides the highlights of the fundamental indicators for the residential development market in macro, fiscal, housing investment and housing activity.

“Although there are some indicators that have softened, the demand for new housing remains positive following rising household wealth, competitive financing costs and increasing population,” Property Council Residential Executive Director Nick Proud said.

“The expectations for low interest rates, reasonable ongoing foreign investment and an increasing population will continue to drive a fundamental demand for new homes to be built through 2016.

“In a vital sign for improving affordability, the indicators also show that residential supply nationally is finally meeting household formation requirements to create enough housing to satisfy growing demand. However, one good year doesn’t undo 10 years of under building."CoreLogic RP Data Head of Research Tim Lawless said:“Investor loans are winding back, as banks reduce their appetite for lending to this market. This will see new housing commencements, particularly in apartments start to recede."“In a welcome change for those looking to buy a home, the heat is expected to come out of housing price rises over the next year, as record supply begins to soak up the excess demand that has been there for some time.

“Rental prices aren’t expected to see any massive spikes, and with good levels of new rentals coming on line there will be greater options for those looking to rent.

“Again the growth in rental and new housing prices are largely centered around Sydney and Melbourne, but the expectations are that growth will come down from the double digit heights experienced in these cities over the past 5-10 years.

“Housing prices across capital cities are shown to have risen by 57 to 138 per cent in the five year period to 2005, and once they did that they went on to post 23 to 84 per cent gains in the next five year period. However, it is fair to say that the days of a 15-30 per cent improvement in national house prices per year are now past.

“There are no unique market shifting macro drivers such as financial deregulation, international lower bound interest rates, mobilisation of double incomes, nor capital locked up in un-renovated homes that is about to be unleashed, which will stimulate significantly more housing investment.

“The market indicators broadly support a continuing of strong levels of dwelling construction activity at least until mid-2016 which is cause for optimism, but we should not be complacent.

“The economy will rely on strong housing construction and so it is important that the right policy settings are introduced around planning for infrastructure and tax reform to maximise the ongoing positive impact of this industry on the country’s economic wellbeing.

“We now have a federal focus from both sides of Government on liveable cities and the built environment, which supports the prospect that residential activity levels will be coordinated nationally to tackle affordability, support jobs and drive the economy."