Construction industry continues buoyant run

x_157_81445_0_14100830_300If there was one sector of the economy that has enjoyed impressive growth in the last year, it’s residential construction. The building industry has been continuing on its upward streak for many months now, helping to supply homes to match the frantic rate of residential sales, particular in New South Wales.

New lending figures from the Australian Bureau of Statistics (ABS) have shown a slight drop off in finance for new dwelling construction, but the outlook is still positive, according to many commentators. The number of commitment for new homes dropped 0.6 per cent during May in trend terms, while the number of loans for the purchase of new properties jumped 1.1 per cent.

Residential building still on top

However, analysis from the Housing Industry Association (HIA) shows that the value of lending for new home building is still 11.5 per cent higher than a year ago – despite a marginal 3.2 per cent decrease over the month. What’s more, HIA Economist Diwa Hopkins said that the most recent rate cut hasn’t yet been reflected in the figures, suggesting that there could be strong building activity still to come.

“It remains to be seen whether this latest cut will generate further momentum in lending for dwelling construction,” Ms Hopkins said.

“Regardless, we expect new home building to continue to play a vital role in supporting domestic economic growth.”

The Property Council of Australia remains similarly positive about the real estate industry’s position moving forward, with low interest rates predicted to buoy peak-level development for the unforeseen future.

Executive Director for Residential Nick Proud pointed out that governments shouldn’t take their foot off the accelerator of driving continued growth in the building sector. This means removing inefficient taxes, boosting land release and improving how development proposals are assessed.

“This is at a time of unprecedented low interest rates by the Reserve Bank of Australia that should drive continually high lending finance figures and eclipse current record levels in housing construction,” Mr Proud said.

“But we can’t afford to see growth stall in this key sector of Australia’s economy.”

First home buyers increase 

Improvements on the supply-side can do a lot more than just drive economic growth – they can improve confidence and encourage more young Australians to buy a house.

The Real Estate of Australia (REIA) analysed lending figures, finding that the proportion of first home buyers in the market has increased marginally to 15.9 per cent over the month, up from 15.8 per cent in April. This is a further increase from the record low of 15.7 in March, which indicates that young purchasers are finally becoming more active in the market.

On top of this, REIA President Neville Sanders said the overall decrease in finance during May should offset concerns about an overheating market, which is likely good news for those purchasing real estate in locations like Sydney.

“The moderating housing lending suggest any concerns of an over heating property market should be laid to rest and also allay fears of an imminent bubble,” concluded Mr Sanders.

With buyers continuing to favour new builds, and first home buyers becoming more active, the prospects for the property market are looking bright.

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