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Construction and investment data suggests some property investor favourites could be next in line for a spike in buying activity.
According to BIS Oxford Economics’ Building in Australia 2019–2034 report, new builds nosedived by about 12 per cent in the financial year just ended, representing a drop of about $110 billion. new building projects will take a deep dive before a strong recovery in 2020–21.
Broadly speaking, there should be a strong uptick by 2020–21, and some investor favourites are set to resurface, in the states of Queensland and Western Australia.
“The next pick-up in new dwelling construction is expected to coincide with a continued buoyant level of non-residential investment and a turn in mining investment,” said Robert Mellor, managing director at BIS Oxford Economics.
“Queensland and Western Australia are well positioned to lead the next residential upturn, ahead of New South Wales and Victoria.”
For Mr Mellor, first home buyers and upgraders will likely spark the recovery in commencements. This should be followed by investors, once vacancy rates and rental yields become more lucrative and attractive.
However, for those planning to circle those markets as targets, there are some variables which could change these outcomes.
For example, if investors don’t return to the market, it’ll be tough to sustain momentum for a recovery in new builds.
“We could experience a deeper downturn before then, and a delayed recovery, if fundamental drivers of residential activity were to ease more than expected,” he added.
“A crisis of confidence surrounding build quality in the apartment market has the potential to weigh further on apartment construction over the short term, adding downside risk to the outlook.”
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