New home construction in Australia could be headed for a correction as anticipated interest rate hikes inevitably dampen activity, making the recent rise in new builds just a momentary blip. Supply shortages are a real risk with housing starts expected to decline 9 percent or more in 2011, while inflated prices are coming back down to earth. See the following article from Property Wire for more on this.
More new properties are being built in Australia but the outlook is weak with increasing interest rates adversely affecting the country’s real estate industry, it is claimed. The latest figures from the Australian Bureau of Statistics show that construction approvals increased 9.3% in seasonally adjusted terms in October after falling for the previous six months.
The ABS figures show that approvals increased in New South Wales by 14%, in Victoria by 4.6%, in South Australia by 6.1%, and in Western Australia by 2.3%. Approvals fell by 0.7% in Queensland.
Overall private sector houses approved rose 1.5% with rises in New South Wales of 3.5%, in Victoria 3.1% and in Western Australia 2.4%. While Queensland saw a 8.1% drop and South Australia a fall of 2.1%.
Prices increased 0.3% in October. Canberra reported the biggest increase, up 1.8%, followed by Darwin at 1.7%, Adelaide at 0.9% and Sydney and Melbourne at 0.6%. While Brisbane was down 0.2% and Perth down 1.8%.
The Housing Industry Association, however, said the outlook for residential building remains weak. Expectations of increased interest rates have really taken the wind out of the sails of the non-resource sectors, according to HIA senior economist Andrew Harvey. ‘As a result, the likelihood of a sharp correction in new home building in 2011 is increasing,’ he said
The Housing Industry Association/Jeld-Wen survey of the country’s largest builders showed new home sales rose a seasonally adjusted 2.4% in October from September. But over the three months to October, new homes sales fell 9% and are down 17% from the same quarter a year ago.
Sales of private multi unit dwellings such as apartments fell 2.6% in October and HIA is forecasting a decline of 9% in total new housing starts in 2011. ‘We do, however, recognize that anecdotal evidence currently suggests that this forecast looks optimistic,’ HIA said in a statement.
The withdrawal of government stimulus to support housing through the global financial crisis is also denting demand for housing, deepening concerns that housing supply will continue to lag well behind the demands generated by strong population growth.
House prices, widely viewed as unsustainably high, have also fallen over recent months, creating a further deterrent to investment in housing. In New South Wales, sales were down 6.1% in October, marking the fourth decline in six months, the report said. But further south, sales in Victoria rose 5.9% month on month.
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