Australian Bureau of Statistics figures released late last week showed that residential construction became a key source of growth for several state economies during 2013/14, according to the Housing Industry Association.
HIA Economist Diwa Hopkins said the 2013/14 financial year recorded a strong and widespread recovery in residential construction, with six out the eight states and territories enjoying increasing activity.
“These 2013/14 results follow quite a weak year for residential construction in 2012/13, when seven of the eight states and territories recorded declining levels of activity,” Ms Hopkins said.
“Furthermore, where there were declines, closer inspection shows that in these instances the overall situation remains healthy. In Victoria, the decline in dwelling investment was a marginal 0.1 per cent, with activity still at a near-record level. In the ACT, the decline was a non-trivial 9.0 per cent, but this is still more than 20 per cent higher than the average level during the 2000s.
“Today’s results also show the important role that new home building and home renovating activity is starting to have for state economies.
“In previous years residential construction had been a drag on overall state economic activity. In 2013/14, activity in residential construction contributed to overall growth. In New South Wales, for example, where gross state product grew by 2.1 per cent, 0.2 percentage points of this were directly attributable to residential construction, Similar developments are evident in Queensland, Western Australia and Northern Territory.”
Ms Hopkins suggest that low and stable interest rate settings are having the desired effect on the housing market and demand for new home building. The latest HIA Economics forecasts [to be released this week] suggest that residential construction will experience further growth in 2014/15.
“There will still be quite a way to go if we are to make material progress in addressing entrenched housing shortages. Policy makers need to understand that supply side constraints can only be held at bay by low interest rates for so long,” Ms Hopkins said.
“The effects of excessive taxation and restricted land supply are stifling the industry’s ability to respond to increases in demand. These issues require all levels of government to take action and the coming federal reviews on taxation and the federation are the obvious starting point to make real progress.”
During 2013/14, Gross State Product (GSP) expanded strongest in the Northern Territory (+6.5 per cent), followed by Western Australia (+5.5 per cent), Queensland (+2.3 per cent) and New South Wales (+2.1 per cent). Elsewhere GSP increased at slightly slower rates: +1.7 per cent in Victoria; +1.3 per cent in South Australia; +1.2 per cent in Tasmania and +0.7 per cent in the Australian Capital Territory.
Total dwelling investment grew most strongly in the NT (+39.4 per cent), followed by SA (+13.3 per cent), WA (+11.1 per cent), NSW (+5.6 per cent), Queensland (+4.0 per cent) and Tasmania (+0.4 per cent). There were declines in the ACT (-9.0 per cent) and Victoria (-0.1 per cent).