New housing construction outlook gloomy, but Queensland a bright spot: HIA

The Housing Industry Association (HIA) has downgraded already modest expectations for new home construction over the next two financial years, but expects a strong pick-up in the Queensland, which appears to have bottomed out.

There are also more modest growth expectations for NSW and WA, albeit off historically low bases, but new home building in Victoria – Australia’s new home building capital – is set to fall sharply over the next two years, though it remains the top state for new home construction.

In a year where prominent building companies like Kell & Rigby, Reed Construction and St Hilliers Construction have collapsed, not to mention numerous smaller builders, the HIA expects new housing starts to fall by 14.1% to a level of 135,284 for the 2011-12 financial year.

This will be the seventh time in nine years that Australia has experienced a decline in new housing starts, with the 2011-12 figure just above figures recorded at the peak of the GFC.

The low point in new housing construction occurred around the December 2008 quarter – at the height of the GFC – when the HIA recorded new houses being built at an annualised rate of 130,548.

The HIA expects new housing starts before to pick up modestly in 2012-13 with growth of 4.9% to 146,600 starts, followed by a further increase of 4.4% in 2013-14, which would take starts to a level of 148,064.

These figures have been revised down from previous HIA forecasts of 137,820 starts in 2011-12, and a recovery reaching 151,200 starts by 2013-14.

The modest recovery forecast over the next two financial years is primarily focused around NSW, Queensland and Western Australia – states that are experiencing periods of historically low housing starts.

The outlook is strongest for Queensland, with the HIA optimistic of a recovery from 2012013 with new forecasts expected to rise by 13.3% from 25,370 to 28,745.

The forecast is even brighter for 2013-14, with the HIA expecting a 15.8% improvement to 33,286 starts.

The HIA says that NSW has “endured a synchronised trend decline in new home building and renovations activity of a duration unrivalled in Australia’s post-war history”, which continues in 2012, with the industry group forecasting a 7.9% decline to 28,524.

However, the HIA forecasts growth of 18.2% in 2012-13 and 5.3% in 2013-14, taking starts to a level of 35,503, higher than a previous forecast level for 2013-14 of 33,830.

“Given the awful base we are forecasting a recovery from, 35,503 starts is not a bullish forecast,” says the HIA.