​Housing construction set to grow in 2016

But could face subsequent declines in 2017 onwards

Residential building work will maintain steady and strong growth throughout 2016, according to early indications from this year’s Australian Construction Industry Forum (ACIF) forecast.

Though the ACIF is yet to finalise its analysis of data around the Australian construction industry, Kerry Barwise – head ACIF forecaster – said preliminary findings show the building and construction industry is still set to play an important role in the economy, with residential construction steadily rising throughout 2016.

Barwise also noted that contrary to many media reports, engineering construction does not seem set to face an unexpected freefall, with some 3000 new engineering construction projects added to the ACIF 'major projects list’ since late last year.

“Doom-and-gloom sentiments sometimes seen in the media are out of step with the preliminary numbers, and in some areas are spooking the industry and its clients,” he said.

“Residential housing is the focus of industry and general media comment at the moment, as it is clear that the frenzy for homes, both detached and attached, is running out of puff.

“However, commentators spruiking a crash today or tomorrow are out of touch with what is actually happening, as there is a lot of work yet to come and buyers lining up to buy given still low interest rates.”

Preliminary data up until the end of 2015 reportedly showed that residential building work grew again to record high levels. The amount of residential building work to be done this Financial Year [ending in June 2016] is still likely to be larger than the previous peak in 2014-15, according to the ACIF.

Data has also showed a notable increase in the number of active road and rail transport projects in the ACIF’s ‘major projects’ database and much of the spending on the NBN is now coming into the construction sector work pipeline.

The previous ACIF forecast, released in November 2015, predicted a decline of between $2-4 billion of construction work per year for the next three years

The May ACIF Forecasts are still being prepared, with data from Australian Bureau of Statistics, Cordell Information, among other sources, and will be launched at a business leader’s breakfast on 5 May, ahead of release to the industry on 12 May.

Last month the Housing Industry Association (HIA) shared its latest National Outlook that new home building activity will begin to slowly decline in the latter part of 2016, calling for housing policy reform that would soften the blow of this drop.

The HIA said Australian residential construction should expect a large decline after coming off an unprecedented up-cycle following record high new dwelling construction levels last year (220,000).

This reduction in activity will accelerate during 2017, and bottom out in the 2017/2018 financial year at around 160,100 starts, the housing lobby group said.

HIA chief economist Harley Dale said the national new home building sector has made an outstanding contribution to overall economic activity in Australia over the last four years, without which the domestic economy would have been considerably weaker in recent years.

“Looking beyond the current cycle, a strong focus on housing supply and policy reform is crucial to Australia’s future economic and social prosperity as we look to successfully house a growing and ageing population, along the way reducing pressures on the nation’s burgeoning health budget,” said Dale.

Dale noted real changes in reform would need to go beyond “tinkering with negative gearing and capital gains tax” which he claimed could instead damage consumer confidence during a crucial juncture in the housing cycle.

“Australia will fail to achieve this objective without federal government leadership and involvement in housing policy reform, including strategic planning for the future housing and residential infrastructure requirements of our growing and ageing population.”