House prices are expected to rise as supply and demand constraints continue to plague the nation.
According to the latest data from the Australian Bureau of Statistics (ABS), the number of dwelling starts over the June quarter was 13 per cent below the decade average.
Simultaneously, national population growth in March was 49 per cent higher than the decade average.
RP Data’s national research director Tim Lawless said the results highlight just how weak the housing construction sector has been since building activity started to fall in early 2010.
Across all housing construction types, detached houses proved to be the weakest performers, where the ABS recorded that construction began on just 20,786 houses over the June quarter of 2012, a level which Mr Lawless confirmed as being approximately 21 per cent lower than the decade average of 26,189 starts.
In contrast, unit commencements over the June quarter were tracking almost 3 per cent higher than the ten-year average despite a recent slowdown from a historic high.
Mr Lawless noted that in Victoria, where new home building starts led the nation since 2008, has shown a sharp slowdown in housing construction.
“Between the beginning of 2008 and the end of March 2012, Victoria accounted for one third of Australia’s housing starts; this is despite Victoria’s population growth comprising a lower 25 per cent of the nation’s overall population increase. The number of dwelling starts fell by 18.4 per cent between June 2011 and June 2012, however, housing construction in Victoria remains 6 per cent higher than the decade average,” Mr Lawless said.
Over the 2011/12 financial year, 60 per cent of Victoria’s housing starts were for detached houses while the remaining 40 per cent of dwelling starts fell into the ‘other’ category, which is predominantly characterised as unit dwellings.
Prior to 2008 the proportion of housing starts for houses averaged around 75 per cent.
The difference in the proportion of dwelling commencements for houses and ‘other’ dwellings more recently can be most likely attributed to a surge in inner city unit development.
Victoria’s surge in dwelling commencements began during the June quarter of 2009, with the trend in housing construction breaking ranks with the other major states at this time.
“The surge in home building came at a time when Victorian and national population growth was consolidating. Victorian population growth reached a recent peak in March 2009 with 31,089 new residents over the quarter.
“By June 2010, Victorian population growth had fallen by just over 66 per cent, while at the same time housing starts increased by 50 per cent. Conversely, now that population growth is once again ramping up, creating additional demand for housing, Victorian housing starts are winding back.
“The rate of home construction in Victoria has raised the spectre of housing over supply; however that may not be the case.”
In the June 2012 ‘Housing Supply and Affordability – Key Indicators, 2012’ publication, the National Housing Supply Council, which operates out of the Federal Treasury, shows at the time of publication Victoria’s housing market remained undersupplied to the tune of about 10,000 dwellings.