Oversupply fears as home building hits record high

Home construction is at record levels but the industry warns volumes are creating “unprecedented uncertainty”.

A fall in new housing starts is inevitable after 2017-18, says the HIA

Home building starts have hit a record high, passing the previous peak in 2003-04 but creating uncertainty for the industry and wider economy, says the Housing Industry Association,

The warning came as Melbourne-based Metricon Homes emerged as Australia’s biggest builder, starting work on well over 4000 homes in the last financial year.

The HIA said construction started on 69,191 new homes in 2015-16, compared to 69,100 in 2003-04.

It was the first time in over a decade that the HIA’s Housing 100 report was dominated by the major eastern markets, with particular growth in Melbourne and regional New South Wales.

New research from industry researchers IBISWorld yesterday also predicted a 3.8 per cent rise in growth over the next five years through 2016/17 for multi-unit apartments and townhouse construction.

HIA chief economist Harley Dale said the broader economy should celebrate the flow-on from construction levels.

“This record is certainly good for the economy but, to be frank, nobody knows how the issue with medium-to-high density product will resolve itself,” he said.

He warned the volume of medium-to-high density product in the housing pipeline had led to “an unprecedented degree of uncertainty regarding the timing and magnitude of the down cycle”.

“The broad brush approach to credit restrictions applied by APRA, together with the cash-grab transaction costs levied by some state governments on foreign investors exacerbate the downside risks to new home construction and therefore the broader domestic economy.”

A fall in new housing starts was inevitable after 2017-18 but the scale was still to be determined, Mr Dale said.

Metricon Homes started 4365 new properties during the year followed by BGC (Australia) with 4049 new starts and billionaire Harry Triguboff’s Meriton Apartments third.

Victoria saw a spike of 5.7 per cent in housing starts and starts in New South Wales grew 5 per cent in 2015-16.

Western Australia’s new housing commencements plunged by 19.3 per cent, the only state which saw a drop in new starts.