Residential building activity is set to slow over the next few years as the housing market absorbs the record-high number of building work completed last year.
Figures from the Australian Bureau of Statistics (ABS) shows $68.7 billion worth of work on new homes was completed last year, an "all-time high" according to Housing Industry Association Senior Economist, Geordan Murray.
"The 2018 calendar year set a record for residential building activity, but the amount of building work being done by the industry is now slowing,” Mr Murray said.
“The large amount of building work done is a product of having such a large number of homes under construction during the year,” he added.
But the construction boom is showing signs of easing. The value of work completed on new homes declined by 3.7 per cent in the final quarter of 2018.
“This implies that the pipeline of new residential building work is thinning out and as the homes that are currently under construction reach completion there are likely to be fewer new projects to replace them," Mr Murray said.
“The number of homes under construction will continue to decline throughout this phase of the cycle and the value of building work will decline accordingly."
Sales of new residential lots, new home sales, building approvals and housing finance all deteriorated significantly during the latter stages of 2018.
Mr Murray said the figures provide a good indication that next week's GDP figures will show the slowdown in new home building has detracted from GDP growth for the second consecutive quarter.
“HIA forecasts further declines in home building over the next two years which will provide a headwind for economic growth,” Mr Murray added.
Property Council of Australia CEO, Ken Morrison said the figures show the residential construction cycle is at a turning point, and the effects will be felt across the rest of the economy.
Mr Morrison says the figures are a timely reminder that now is the wrong time to change negative gearing policy.
Mr Morrison's comments follow a recent survey by the Property Council of Australia, which revealed 49 per cent of investors would be less likely to invest if the ALP's proposed crackdown on negative gearing and capital gains tax is implemented.
Mr Morrison told WILLIAMS MEDIA the findings highlight the dangers of making big policy changes at this "uncertain" time in the property cycle.
“We are concerned that the proposed changes would drive away investors which will affect the supply of new and established property to the rental market which is essential for one-third of Australian households,” Mr Morrison said.
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