Michael BlebySenior Reporter

Jan 16, 2020 – 12.01am

Housing construction is set to pick up in the second half of this year, after sentiment around residential construction posted its biggest lift in six years on the back of an improving property market and access to credit.

The ANZ/Property Council of Australia March 2020 survey pushed an index of expectations for housing construction over the next 12 months back into positive territory for the first time in six quarters, and the 14.6-point increase was the biggest quarterly gain since the December 2013 quarterly survey.

More apartments means a longer lag from approval to construction – and deeper highs and lows in the country’s housing cycle.  Elesa Kurtz

“The survey is giving a pretty good lead that construction is going to pick up,” ANZ senior economist Felicity Emmett said.

“That’s a really encouraging sign. It’s going to have a big impact as it flows through the economy.”

The turnaround in construction expectations follows earlier surveys last year that identified an improvement in credit availability, while official figures last week for November showed the decline in building approvals – an indicator of future housing activity – had likely troughed.


However, the turnaround will take time. Official figures published on Wednesday showed new housing starts dropped almost 12 per cent in the three months to September to 40,746 in seasonally adjusted terms – the lowest quarterly total in 6½ years.

Dwelling commencements of so-called attached homes – apartments, townhouses and semi-detached homes – dropped 21.9 per cent quarter on quarter, the biggest quarterly decline in almost 11 years.

While these declines are likely to ease, the prolonged slowdown last year caused Reserve Bank of Australia deputy governor Guy Debelle to warn of a housing shortfall and higher prices.

A higher proportion of apartments in the housing mix relative to detached homes was also increasing the highs and lows of the housing construction cycle, as the lead time to complete commercial-scale housing developments was longer than for detached homes, Ms Emmett said.

“The cycle will [reflect] more lower lows and higher highs in terms of prices and construction,” she said.

There are already signs of a tightening housing market. Consultancy SQM Research earlier this week warned that while residential vacancy rates rose in December, as they do at the end of each year, vacancy levels had likely peaked and would tighten over this year as ongoing population growth absorbed the outstanding newly built housing stock.

Separate figures from Domain show rents have stopped falling in every city but Sydney.

Affordability concerns

Housing affordability was likely to be a concern this year, Property Council chief executive Ken Morrison said.

“One policy message out of this survey is housing affordability is still an important issue to focus on, both at state and federal levels, and that there’s a bit of a warning sign from this survey we could be seeing some acute issues as 2020 and 2021 roll through,” Mr Morrison said.

Housing construction sentiment was one of a number of measures contributing to a boost that lifted the latest quarterly index of sentiment to 123, up five points from the previous survey and above the 2019 average of 121 points.

The survey also showed what Ms Emmett called a “modest” bounce in commercial property confidence, primarily driven by the strongly performing industrial property sector.

Retail property confidence remained weak, while expectations of growth in office capital values strengthened from the previous survey in October in every mainland state except WA.

The low-rate, low-yield global economic environment made professionals more bullish on capital growth prospects for prime assets across all sectors, with cap rates nationally expected to fall 2.7 per cent over the coming 12 months, more than the 2 per cent contraction predicted in October.

Mr Morrison said respondents’ expectations for forward work and staffing expectations over the next 12 months also remained strong.

“That’s quite encouraging,” he said.

The survey, based on the responses of 953 industry professionals between mid-November and early December, shows the balance of respondents expecting conditions to be better over those expecting it to worsen.