Fall in residential construction to benefit home sellers
While much has been made about the recovering construction industry in Australia over the past year, data from the Australian Bureau of Statistics (ABS) seems to contradict this narrative.
Citing ABS data, the Housing Industry Association (HIA) reported a considerable decline in construction activity during the December 2013 quarter.
"The overall value of residential construction work done on new dwellings declined by 2.5 per cent in the final quarter of 2013," said HIA Economist Geordan Murray in a February 26 media release.
"We are seeing good things across a number of leading indicators, but today's data reaffirms our view that the speed and strength of the recovery in residential building has been overstated in some forums."
The HIA highlighted the fact that the value of work done on new detached homes decreased 0.9 per cent during the December 2013 quarter, reaching a level 5.1 per cent below that of the previous year.
Meanwhile, the value of work done on multi-unit construction fell even further, declining 4.9 per cent during this time period. This is especially discouraging, as Mr Murray pointed out that the improved construction levels have been almost entirely driven by the multi-unit market thus far.
"Clearly, the need for policy reform to support housing supply remains a priority if housing is to make the expected contribution to economic growth," he added.
This is a sentiment shared by Urban Taskforce CEO Chris Johnson, who said the fact that New South Wales in particular is trailing behind other states when it comes to building construction shows a clear need for planning reforms.
Residential development in NSW trailed Queensland, Victoria and Western Australia, according to the latest quarterly building construction figures.
"Strong approvals in NSW over the last year do not seem to be flowing into construction expenditure sufficiently to lift NSW compared to other states," Mr Johnson said in a February 26 media release.
While this may be discouraging news for Australians seeking homes for sale, particularly those in NSW, it could also be seen as an advantage for current owners of houses for sale.
Limited inventory and high demand will push property values higher, meaning home sellers have a greater chance of achieving a high sale price at the moment.
And with NSW trailing other states, owners of Sydney real estate are in a better position than most to benefit from declines in construction activity.