New housing construction has reached record highs – which could be great news for struggling first home buyers.
Recently, first home buyers (FHB) began dropping off the property ladder, despite the current record-low cash rate, with the proportion of FHB mortgages noticeably lower than the long-term average, according to Australian Finance Group’s (AFG) Mortgage Index.
NAB’s latest Residential Property Survey has revealed housing affordability is currently the biggest constraint in the new housing market (nationally). So the increase in new home construction could cut some would-be-buyers a little relief by making Australian homes a little more affordable.
Building industry sets records
New home building figures have spiked to record levels, according to the Housing Industry Association (HIA).
“The fact that new home building has reached a 20-year high is very welcome. Back in early 2012 when activity was so low, the prospect of breaking through 180,000 starts within a couple of years was beyond almost everybody’s most optimistic expectations,” said Shane Garrett, HIA Senior Economist.
In areas such as Sydney, where the median selling prices of a home is $800,000 according to RP Data, it’s clear more needs to happen to help first-time buyers.
Good news for buyers
New housing starts reached 45,527 during the second quarter of 2014, seasonally adjusted.
The HIA noted this was a 6.9 percent dip on the March quarter, but there is still plenty to celebrate. That’s because overall dwelling starts over 2013/14 reached 180,833 — ahead of the figure highlighted by Garrett.
Furthermore, the 180,833 figure is the largest 12-month total since early 1995.
With housing starts surging, affordability may increase across the nation. This is good news for first-time buyers looking to get a leg up on the property market without breaking the bank. While, it may be some time before a jump in dwelling starts translates to more affordable prices, it’s clear the groundwork has been laid to enable this.
We still have a way to go!
While home starts are on the up, the HIA has still warned about supply restrictions.
For instance, during the second quarter, detached house commencements dropped by 1.1 percent, with multi-unit commencements dipping by 15 percent, seasonally adjusted.
“A number of factors continue to plague the capacity of the new home building sector,” Garrett elaborated.
The senior economist cited stamp duty, high taxation, delays in residential land availability and planning restrictions as significant restraints on the sector.
“Failure to tackle these constraints will mean that the ability of the industry to provide for Australia’s long-term housing requirements will continue to be seriously undermined.”
These issues will need to be addressed in order to tackle future housing shortages and affordability issues. Garrett also highlighted the importance of strong dwelling start figures between now and 2050.
“Even in such a strong upturn, we are still short of this requirement today. This is a stark illustration of the serious supply-side issues which will need addressing.”