Price pressures forecast to persist despite building boom

Australia will build 41 per cent more homes in 2014/2015 than three years ago – yet the country is still facing a supply shortage.

The Housing Industry Association has forecast that a record 205,500 homes will be built this financial year, compared to 145,300 in 2011/2012.

This is significantly higher than the 186,000 new dwellings per annum that are needed to maintain a balance between supply and demand, according to the HIA.

However, supply is then expected to decline, with forecasts showing it will fall 10.6 per cent to 183,700 in 2015/2016, fall another 4.7 per cent to 175,000 in 2016/2017 and then fall another 1.1 per cent to 173,100 in 2017/2018.

The final year of the forecast shows supply climbing 1.5 per cent to 175,700 in 2018/2019.

The HIA said it is wrong to claim that Australia has an oversupply of housing.

“Over the past 40 years, new dwelling commencements have averaged 153,000 per annum,” according to the association.

“The 20-year average is 155,400 while over the last decade we have averaged just over 159,000 per annum.”

The HIA said that current policy settings will probably prevent Australia from returning to the 186,000 target once this temporary construction boom ends.

“The detached house construction cycle has peaked at over 112,000 dwellings. While this apex is 8 per cent above the long-term average, it is below the market demand that exists for new detached housing this cycle,” it said.

“A lack of shovel-ready land, among a number of constraints, is leaving a significant cohort of potential new home buyers of detached housing out in the cold.”

[Related: Apartment trend drives booming housing approvals]

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