The record-breaking housing boom helped offset the fallout from the mining boom, keeping Australia's economy record for the longest unrecession in the world. However, some experts predict that Australia's construction boom has reached its peak, and the future housing construction market will suffer a cold winter.
Significant reduction in residential construction activity
According to reports, BIS Oxford Economics, a leading economic forecaster, predicts that construction activity in Australia will fall from its peak of two hundred and thirty thousand to one hundred and sixty thousand over the next three years, a sharp drop of 31 percent.
One of the most affected is the high-density apartment market. Construction of high-density apartments across Australia is expected to shrink by 50%. Brisbane and Melbourne in particular, will face up to 70% and 60% of new construction activities.
"in the next six months, we will not see a significant impact, but when we enter 2018, especially with the completion of those high-density apartments," said Mailer (Robert Mellor), managing director of, BIS Oxford. There will be a significant reduction in construction activities in residential buildings. "
In recent 12 months, residential construction in Brisbane has been significantly reduced, and residential construction in Sydney and Melbourne will also begin to decline, Ms. Mailer said.
The shortage of supply turned into an oversupply
The sharp decline in residential activity was a direct result of a record-breaking construction boom. The construction boom ended the housing shortage in Australia, leaving Sydney and Melbourne in short supply.
"According to the population growth and the information of the Australian family, the current demand for the home is about 18.4 million per year.". "For that reason, in the long term, we are basically over-built."
This means that Australia will face serious problems with construction workers as the mining boom recedes and the housing boom rapidly recedes. Thousands of construction workers face unemployment.
Mailer points out that the downside risk predicted by the, BIS Oxford is the risk of a spiral decline. A fall in employment could trigger higher home loan defaults, lower house prices and further cuts in development projects.
Risk of the withdrawal of the investo
Another risk to Australia's construction market is that the current housing boom is too dependent on investors.
"overseas investors are facing significantly higher taxes and possible controls on money out of the country, or investors will not be able to get the money in Australia," he said. "in addition to this, there is a need to face increased difficulties for local investors and significant increases in interest rates, especially for interest-only loans," Mailer said.
Mailer said it would be the main thruster, and that as developers could not sell their apartments, there would be a big shift in construction.
In addition to BIS Oxford, Australian economist Polly Guinness (Riki Polygenis), head of Australian economics at (NAB), the National Bank of Australia, is not optimistic about future forecasts.
"in 2017, residential construction activity in Australia will continue to grow until the first half of 2018 and then begin to decline," she said. But we expect spending on non-residential construction and infrastructure to increase gradually. "