GDP Growth Slows As Home Building Peaks

The latest figures from the ABS show that investment in new home building reached a record high in the 2014/2015 fiscal year, but activity eased in the June 2015 quarter which had a negative impact on Gross Domestic Product growth, noted the Housing Industry Association.

HIA Economist Geordan Murray said, "The residential building sector performed strongly throughout the 2014/2015 fiscal year. In annual terms there was $52.2 billion of investment in new home building during the year which was a new record for the sector.""From a quarterly perspective the result wasn't quite as strong. After reaching a record in the March 2015 quarter, the level of investment in new home building declined by 1.9 per cent in the June 2015 quarter but remains around 10.4 per cent higher than the June quarter a year ago.""The level of investment in home renovations continued to improve in the June quarter. Following on from a particularly poor run throughout 2013 and 2014, renovations investment has posted a third consecutive quarter of growth, up by 0.4 per cent in the quarter, and recorded the strongest level of activity since mid-2012.""The strong growth in new home building over the last few years has made a significant contribution to GDP growth. However, residential building activity is currently tracking at record levels and leading indicators are suggesting that the sector is close to a peak in the current building cycle. Despite the strong level of activity, the modest decline in the level of residential building detracted from GDP growth in the quarter.""There is a large volume of activity in the pipeline that should sustain an elevated level of home building for some time yet, however it is unlikely that residential building will continue to make the strong contributions to GDP growth that is has done over the last couple of years. In order to see a sustained economic recovery we must see broader improvements in private investment beyond residential building."