Dwelling starts at 13-year lows

In the December quarter, Australian dwelling starts rose by 15.3 per cent – marking the biggest quarterly increase in eight years. Housing starts rose by 13.4 per cent while apartment starts increased by 18.9 per cent.

What does it all mean?
The latest result paints a mixed picture of the home building industry. It is certainly encouraging that dwelling commencements recorded the biggest quarterly increase in eight years, however if you take a step back and look at the level of building over the entire year, the result is quite different. Over 2009 dwelling commencements posted the weakest calendar year result in 13 years – a clear sign that we are still under building, especially given that population is growing at the fastest pace in 40 years.

If anything the results highlight how effective the stimulus was over the latter part of the year. First home buyer grants and generational low interest rates incentivised budding home owners to go out and build their new home. However going forward the hangover effects need to be considered, particularly given further rate hikes are around the corner.

The anecdotal evidence suggests that many developers are still finding it difficult to get access to funding and despite current activity in the housing industry going gangbusters, new enquiries for building are drying up. But the good news is that the current level of building should support economic activity over the coming year and have multiplier effects across the economy.

Governments of all forms  should be actively encouraging more activity by investors in the housing market as well as looking to break down the cost, planning and administrative barriers faced by developers.

What do the figures show?

The number of dwelling commencements rose by 15.3 per cent in the December quarter after rising by 11 per cent in the September quarter. House commencements rose by 13.4 per cent while apartment starts surged by 18.9 per cent.

In the December quarter, starts rose across all states. The ACT (up 33.8 per cent) recorded the highest increase, followed by NSW (up 16.5 per cent), Victoria (up 15.6 per cent), Queensland (up 13.4 per cent), Northern Territory (up 12.2 per cent), South Australia (up 8.7 per cent), Western Australia (up 2.3 per cent) and Tasmania (up 0.8 per cent).

Over 2009 work started on 138,450 dwellings in Australia – the lowest calendar year result in 13 years (122,205 starts in 1996).

What is the importance of the economic data?

The ABS figures on dwelling commencements are compiled on the basis of returns collected from builders and other individuals and organisations engaged in building activity. The data is useful in highlighting activity levels in residential construction.

Source: Source Savanth Sebastian, Economist, CommSec