The Urban Developer
AdvertiseEventsWebinars
Urbanity
Awards
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
Untitled design (8)
LESS THAN 30 DAYS UNTIL OUR FLAGSHIP CONFERENCE 29-31 JULY, GOLD COAST
4 WEEKS UNTIL OUR FLAGSHIP CONFERENCE 29-31 JULY, GOLD COAST
SECURE YOUR SPOTDETAILS
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
OtherAna NarvaezThu 17 Oct 19

Housing Shortfall Will Kick-Start Price Growth: RBA

TUD+ MEMBER CONTENT
e6090191-fe85-47da-89b2-0c4faabb7832
SHARE
90
print
Print

The residential construction downturn is larger than the Reserve Bank expected, and with building approvals 40 per cent lower than their 2017 peak, a shortfall in housing supply looks “quite likely”.

In an address in Sydney on Thursday, Reserve Bank deputy governor Guy Debelle said that while the bank forecasts a further 7 per cent decline in housing investment over the next year, the downturn looks set to bottom out by 2020.

Debelle said that tight conditions on lending to developers and longer lead times on high-density construction means that supply may lag behind demand—prompting a price response from the housing market.

“So there is quite likely to be a shortfall again in the foreseeable future,” Debelle said.

“Hence some large developers tell us that they are prepared to retain their employees through the coming trough in activity.”

The Reserve Bank’s forecast for a 2020 trough in construction activity echo predictions made by other economists, including Commonwealth Bank’s Kristina Clifton who estimates an undersupply of apartments from as early as next year.

“Despite the massive boom in recent years, residential construction is below average relative to population growth, [which] increases the attractiveness of new development,” Clifton said.

Related: Property Investors Rise in Every State and Territory

▲ RBA's deputy governor Guy Debelle said that "2020 looks like being the low year for the residential construction sector".


However, Debelle did point to downside risk that the decline could be more protracted and directly affect the economy.

Residential construction grew from 2012—underpinned by faster-than-expected population growth—to make up the highest share of Australia’s gross domestic product since the global financial crisis.

With housing construction sitting at around 6 per cent of GDP, the decline in investment will “directly subtract around 1 percentage point from economic growth”, Debelle said.

It’s an effect that Debelle says may be “somewhat larger” given the impact the residential construction sector has on business services and manufacturing.

Official figures released by the ABS on Thursday show that the unemployment rate has declined again in September, adding a lower-than-expected 14,700 jobs—while the number of people looking for a job remains at record highs despite recording a slight 0.1 percentage point decline.

Debelle said that the bank remained concerned about aggregate outcomes for inflation and unemployment.

“Unemployment is a little higher than it was at the beginning of the year, and there has not been much upward pressure on wages. In turn, this has contributed to the extended run of inflation outcomes below the medium-term target range.

“As a result, the board has decided to ease monetary policy in recent months.

“With these actions, we are seeking to make more assured progress towards both full employment and the inflation target.”

ResidentialAustraliaConstructionFinanceReal EstateConstructionSector
AUTHOR
Ana Narvaez
The Urban Developer - Editorial Director
More articles by this author
ADVERTISEMENT
TOP STORIES
Exclusive

Tapping the Bunnings ‘Halo Effect’

Taryn Paris
5 Min
Exclusive

‘Construction Not a Scale Game’: Hutchinson

Phil Bartsch
9 Min
Nation's build-to-rent project Charlie Parker in Sydney's Parramatta where more projects are being located and built outside the CBD.
Exclusive

Foreign Capital Still Dominates BtR but Things are Changing

Marisa Wikramanayake
7 Min
Exclusive

Fortis Reveals Plans for Coveted Bowen Terrace Site

Taryn Paris
4 Min
Exclusive

Accor Deputy Delivers Verdict on Brisbane Games Hotel Shortfall

Phil Bartsch
6 Min
View All >
Wynnum Masterplan hero
Development

Masterplan Revealed for Brisbane Bayside Super-Site

Phil Bartsch
Markets

Private Credit’s Biggest Risk in Expansion: Sameer Chopra

Taryn Paris
Residential

Consolidated Reveals Next Riverfront Play in $64m Deal

Leon Della Bosca AND Taryn Paris
Don O’Rorke has put his foot on “the last absolute riverfront site” and will reveal his plans before year’s end...
LATEST
Wynnum Masterplan hero
Development

Masterplan Revealed for Brisbane Bayside Super-Site

Phil Bartsch
4 Min
Markets

Private Credit’s Biggest Risk in Expansion: Sameer Chopra

Taryn Paris
2 Min
Residential

Consolidated Reveals Next Riverfront Play in $64m Deal

Leon Della Bosca AND Taryn Paris
3 Min
Development

Regional Home Designs That Maximise Comfort and Space

Partner Content
3 Min
View All >
ADVERTISEMENT
Article originally posted at: https://theurbandeveloper.com/articles/housing-shortfall-will-kick-start-price-growth-rba