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New home construction hits 7-year low

The number of new homes built during the September 2019 quarter has dropped by 11.7 per cent, falling to its lowest point since early 2013 according to Australian Bureau of Statistics and Master Builders Australia.

The fall in new home starts was more pronounced in high-density sections of the market, which saw a 21.9 per cent decline over the same period of time.

Housing Industry Association Senior Economist Geordan Murray said while there was confidence in the broader housing market during the second half of 2019, the building activity data shows that new home starts during the September quarter continued to retreat.

“Many of the new homes where on-site building work commenced during the September quarter are likely to have been purchased during the first quarter of 2019, when confidence in the housing market had dropped to the lowest ebb of the cycle,” Murray said.

“On-site building work on a new home typically starts several months after a block of land has been purchased and a builder engaged. The lag can be even longer for new apartments purchased off the plan.

“The soft result in the September quarter is more reflective of the weak housing market conditions experienced during in the early part of 2019 than the conditions that we saw in the second half of the year.”

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The most significant factor behind the drop is the decline in commencement of new multi-unit developments in Sydney and Melbourne, Murray said. The number of dwellings in new multi-unit developments that commenced during the September quarter dropped by 20.6 per cent and is 39 per cent when compared with a year ago.

“The second half of 2019 saw a marked improvement in housing market sentiment and leading indicators suggest that demand for new homes has stabilised. The improved market conditions mean that it has become less likely that the substantial declines in new home starts that characterised 2019will continue into 2020,” Murray said.

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