Victoria loses residential building crown to NSW: HIA

New South Wales – for the first time in a decade – has replaced Victoria as Australia’s biggest home building state in the current financial year, according to the Housing Industry Association.

The HIA forecasts around 50,000 dwellings have commenced ­construction in NSW, compared to around 47,000 in Victoria.

Source: Housing Industry Association.

The last time NSW built more homes than Victoria was in 2003/04. Western Australia is also driving the new home building recovery, also at decade highs of around 27,000 starts. 

The HIA expects NSW to remain the nation’s biggest home builder for the rest of the decade, with Victoria to have annual declines to around 42,000 starts in 2016. Victoria's peak was 60,000 new starts in 2010.

The HIA forecasts the pace of the residential construction recovery to accelerate with a 10% rise in housing starts this financial year reaching 180,000 commencements led by NSW, Western Australia and Queensland.

Source: Housing Industry Association.

But HIA chief economist Harley Dale while activity at current elevated ­levels will remain, further fast growth faces capacity ­constraints. Starts are expected to dip to 175,000 next year.

Dr Dale said the post GFC period has been a challenging one for new home building.

"Stimulus measures employed to combat the GFC provided an initial recovery in new dwelling commencements from a historically low level of only 132,000.

"However, the recovery only lasted four quarters during which commencements increased by 25% during the 2010 calendar year.

"As the effects of the stimulus began to wane, a second wave of new home building weakness took hold.

"This saw a decline in commencements in both 2011 and 2012.

"As it turned out, the magnitude of the subsequent rebound (which began in mid-2012) gathered considerable pace, especially in the second half of 2013.

"Record low interest rates have unlocked pent-up demand at a faster pace than first looked likely," he said.

The latest ABS data, released in mid-April, provided a preliminary estimate of 168,300 new dwelling commencements in calendar year 2013, which represents an increase of 11% on the previous year.

"HIA’s forecast had been for a rise of 8% to 164,400.

"Early last year, a range of forecasts for 2013 commencements across the forecasting community was centred on a level of 150,000 and the highest forecast was for 160,000," Dr Dale said. 

He added the high level of building observed nationally in 2013 could not have been achieved without such a strong contribution from Victoria, driven by healthy numbers of multi-unit dwellings.

"We maintain our view that the elevated level of new home building in Victoria, driven by the multi-unit segment, is likely to transform into a potential point of weakness over the near term, although to a lesser extent than our previous forecast implied.

"Upward momentum gathered through 2013 in both Queensland and South Australia and this was also a helpful development.

"While momentum is expected to continue carrying activity levels higher in Queensland, the softer labour market conditions in South Australia are likely to provide a head wind."