Australia’s housing investment construction boom is drawing to a close

The housing construction boom, which has propped up the national economy since the end of the mining boom, is fast approaching its end.

Investment in new housing grew 10.6 per cent this year but Treasury is expected to announce that it will slow to 1.5 per cent next year before dropping by around 4 per cent the following year.

Property experts fear this slide will be steeper if property prices start falling.

The Eastern States investment resurgence began in 2012 and has been largely in medium-to-high density housing and apartments that take longer than normal housing to build and it led to a long pipeline build-up of construction.

Treasury says the building pipeline is set to dry up, with approvals peaking last year and dwelling investment will decline as a share of the economy.

Having said that, the pace of the decline is something that is hard to predict, with apartment construction making it difficult to forecast and adding volatility to the housing market.

The record-low interest rates that have driven the boom since 2016 look set to continue into 2018, and while household assets are now five times higher than debt due to rising prices, household debt has grown more than incomes over the same time.

Treasury says this could impact heavily on household spending and dwelling investment.

“The Government and regulators are closely monitoring developments in the housing market to ensure the risks are being effectively managed,” the Treasury Department said in a statement.


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