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Published on December 4th, 2012

Report shows residential construction to grow in WA, QLD and Sydney

Shortages of housing and lower interest rates will spur on the residential land market in Perth, Sydney and south-east Queensland, a new report has highlighted.

The 'Outlook for residential land 2012 to 2017' report said that while growth is expected in those areas, Melbourne and Adelaide should expect a decline in demand for land that can be built on.

BIS has shown that ironically, a low level of construction of new dwellings has created an atmosphere of demand. The lack of new construction has created a shortage and as a result of decreasing prices and lowering interest rates – demand is increasing.

The lack of demand in Melbourne and Adelaide can be traced back to the fact that both areas weathered the Global Financial Crisis well and, therefore, there isn't pressure to create more stock.

BIS Shrapnel senior manager Angie Zigomanis said that there is increasingly positive signs coming out of places like Western Australia and Queensland where there is greater borrowing activity.

She commented: "The rise in loans for new dwellings, although modest so far, suggests that a recovery in demand for new houses and land is beginning to emerge in these states."

"Declines in lot production in the Melbourne and Adelaide markets reflect activity falling from unsustainable record levels, while the weakness in the other cities was the result of excess supply, weak underlying demand, and constrained affordability after land prices had peaked in earlier years."

She added that 2013 should see a pickup in volume as continuing low interest rates provide an impetus for development.

However, the report warned that improving conditions for the construction of real estate will take awhile to gain traction.

What's causing a slowdown is turmoil surrounding economic activity on a local and international level as people get concerned about employment prospects, it added.

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