Despite a recent improvement in residential construction, the Housing Industry Association’s (HIA) chief economist Harley Dale has said the current up-cycle will not be sustainable long term.
According to Mr Dale, persistent supply obstacles will hinder any true recovery in residential construction.
“First home buyer-related activity, the Social Housing Initiative, and the lagged impact of very low mortgage rates will combine to generate growth in new residential work done in 2009 and 2010,” Mr Dale said.
“It remains unclear, however, whether the recovery can gather legs beyond this year in the face of persistent supply side obstacles, rising interest rates, and what to date is an insufficient number of upgrade buyers and investors to fill the void left by first time buyers.”
Figures from the Australian Bureau of Statistics (ABS) showed seasonally adjusted work done on new residential dwellings increased by 2.8 per cent in the September 2009 quarter to an annualised worth of $36.3 billion –3.9 per cent down on the September 2008 quarter.
Work done on detached houses increased by 6.5 per cent over the September 2009 quarter, however, work done on other residential building dropped by 5.5 per cent.
“There was brighter news on the renovations front in the September 2009 quarter with the volume of work done on major alterations and additions increasing by 3.9 per cent following four consecutive quarters of decline,” Mr Dale said.
“The renovations sector should continue to recover after a soft 2008 and 2009 as labour market conditions improve further and gains in home prices bolster confidence.”