Aussie residential outlook is hopeful for 2016

Solid activity in 2016 was the forecast issued by Corelogic RP Data on its Australian Residential Development Outlook Spring Edition report. The report suggests an active residential market next year, as the industry moves on from constructing a record supply of new dwellings this year.

“Although there are some indicators that have softened, the demand for new housing remains positive following rising household wealth, competitive financing costs and increasing population,” said Nick Proud, Property Council Residential executive director.

Low interest rates, reasonable ongoing foreign investment, and a growing population are all expected to fuel demand for new homes through 2016, he said.

“In a vital sign for improving affordability, the indicators also show that residential supply nationally is finally meeting household formation requirements to create enough housing to satisfy growing demand. However, one good year doesn’t undo 10 years of underbuilding,” Proud stated.

CoreLogic RP Data head of research Tim Lawless also offered his view on the report.

“Investor loans are winding back, as banks reduce their appetite for lending to this market. This will see new housing commencements, particularly in apartments start to recede.”

Additionally, Lawless noted that housing prices are expected to cool over the next year as a result of the large supply of homes matching high demand. He said that such a period would benefit those looking to buy a home.

Rental prices are not expected to experience any spikes, and good levels of new rentals joining the market means there will be more options for those interested in this property type, Lawless added.

Citing the report, Lawless stated that the growth for rental and new housing prices will be mostly centred within Sydney and Melbourne. This growth, however, is expected to be nowhere near its previous double-digit records over the past five to 10 years.

“Housing prices across capital cities are shown to have risen by 57 to 138% in the five year period to 2005, and once they did that they went on to post 23 to 84% gains in the next five year period. However, it is fair to say that the days of a 15-30% improvement in national house prices per year are now past.

“There are no unique market shifting macro drivers such as financial deregulation, international lower bound interest rates, mobilisation of double incomes, nor capital locked up in un-renovated homes that is about to be unleashed, which will stimulate significantly more housing investment,” Lawless pointed out.

Although market indicators point toward a continuation of strong dwelling construction activity well into mid-2016, Proud urged we should not be complacent.

“The economy will rely on strong housing construction and so it is important that the right policy settings are introduced around planning for infrastructure and tax reform to maximise the ongoing positive impact of this industry on the country’s economic wellbeing.

“We now have a federal focus from both sides of Government on liveable cities and the built environment, which supports the prospect that residential activity levels will be coordinated nationally to tackle affordability, support jobs and drive the economy,” he concluded.

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