The state of Victoria is starting to see its residential building activity cool, according to the latest report from the Housing Industry Association (HIA).
Victoria experienced a new home building upswing that lasted for five years, with activity levels reaching above previous peaks. However, this growth cycle has now come to an end.
“After a long and sustained boom, residential building activity in Victoria is cooling,” said Fiona Nield, HIA Executive Director, Victoria.
Complementing previous statements of HIA principal economist Tim Reardon, Neild emphasised that APRA restrictions have become a hurdle for market players.
“APRA initially introduced regulations designed to curb high risk lending practices, but the actual changes in the lending environment go above and beyond this. Ordinary home buyers now find themselves facing some constraints accessing finance,” she said.
“Slower processing and a reduction in lending [are] weighing significantly on the housing market. The impact on residential building activity will become more evident as we progress into the new year.”
The downturn in new home building is anticipated to begin in 2018-2019, with new home starts seen to decline by 34.8% from their recent peak by 2020-2021.
Following this train of thought, estimated housing starts in 2020-2021 will be under 50,000 homes in total, hitting slightly below the average of the past decade.
Despite the discouraging outlooks, Neild assured that Victoria will be able to rise above the situation.
“Victoria is in a strong position to handle this downturn: the state’s labour market is in a strong position, economic growth has outpaced the national average for the last four years and population growth continues to fuel demand for more housing,” said Nield.
