Interpac Business and Migration Solutions Melbourne Australia

（October 6, 2010）

THE number of new homes to be built in Australia is in line for a noticeable downturn, according to an industry survey published today.

The Australian Housing Industry Association's National Outlook survey comes at a crucial time in sentiment surrounding the Australian housing market.

Recent data have showed pricing in the market is starting to slow, which has been welcomed by those concerned about the prospect of a housing bubble in the country. However, should housing starts drop significantly, prices could surge again.

In the Australian HIA's National Outlook for the second quarter, the group forecast housing starts would decline 4 per cent in 2010-11 to about 159,393.

Federal stimulus measures, including a first-time home buyers grant, had helped the amount of new homes built nationally increase 26 per cent in 2009-10 to 165,209.

"We are not building enough homes to match demand and going forward our national housing shortage is expected to worsen," said HIA chief economist Harley Dale.

"Renewed weakness in new home starts in 2011 would mean there were only two years in 10 when starts have risen. That is an appalling result, which highlights the challenge Australia faces in addressing a large and growing housing shortage that will place considerable further pressure on rental markets."

The industry association's comments come on the heels of a senior central bank official saying the housing market has already cooled off.

In a speech earlier today, Luci Ellis, head of financial stability at the Reserve Bank of Australia, said dwelling prices have tapered in recent months and housing credit has slowed, most notably to first-time home buyers.

"Loans to property investor households have not surged the way they did during the more buoyant, rather speculative period in the early 2000s," Ms Ellis said.

Further evidence of a slowdown in pricing was provided last week, with RP Data-Rismark reporting Australian capital city house prices fell 0.2 per cent in August from July.

Part of that slowdown in prices has been attributed to a string of interest rate hikes from the RBA earlier this year, although the central bank has now paused with rates in its last five meetings, including yesterday when it surprised economists by keeping rates steady at 4.5 per cent.

While the cooling of house prices will be welcomed by those worried the market place is overpriced, there remains broad concern about the sustainability of Australia's housing market.

Last week, Fitch Ratings said it would conduct stress testing on the housing market in coming months after being inundated with inquiries both locally and abroad on the sustainability of prices.

In looking to tackle the housing starts shortage, the HIA said policy changes were needed.

"Stimulus measures drove a short-lived recovery in new home building and helped Australia avoid a recession,” Mr Dale said.

"However, if we want to address Australia's housing shortage then the federal government needs to lead from the front on a range of policy areas including further investment in skills and training, reform of the tax system, an end to excessive regulation, increased land supply, reduced planning delays and ensuring greater competition in the banking sector so there's adequate finance for development."

On the renovations front, the HIA said low interest rates and renewed growth in home values drove a 5 per cent increase in total activity to $32.8 billion in 2009-10.

The group forecast total investment in renovations would rise less than 1 per cent in 2010-11 to $33.1bn.

(Source:news.com.au)