The ABS released building activity data yesterday for the final quarter of 2017. Detached house commencements increased by 0.7 per cent over the December 2017 quarter, while starts for other dwelling types (predominantly apartments) declined by 11.2 per cent.
“The decline in multi-unit dwelling starts has dragged down the total number of new home starts during the final quarter of 2017. The total number of dwellings starts fell by 5.0 per cent in the December 2017 quarter and was down by 8.3 per cent on the level recorded a year earlier,” said Mr HIA Senior Economist Geordan Murray.
However, the detached house market continued to show growth, increasing by 0.7 per cent over the December quarter of 2017. The number was also up by a similar amount year on year.
Despite the low numbers in multi-unit activity, the pipeline remains positive. Over 150,000 multi-unit dwellings were under construction at the end of 2017, just a hair below the 155,000 level at the peak of the cycle.
A further 33,800 dwellings have been approved in projects which are yet to commence. This figure is a record high.
“The combination of falling commencements and the build-up of dwellings in projects awaiting commencement is somewhat concerning. It is likely to indicate a slowdown in pre-sales activity. New projects will not commence construction until they achieve a satisfactory level of pre-sales,” said Mr Murray.
“Pre-sales to investors, both domestic and from overseas, have been important for many multi-unit developments. With additional taxes on foreign investors and regulators clamping down on investor lending, investors have retreated from the market.
“If we see investors return to the market and the approved projects continue to progress through to work on the ground then residential building work could potentially make a stronger contribution to economic growth this year than we are expecting.
According to Mr Murray, the figures showed that now was not the time for further taxes and constraints on investors.