Home World Price falls across housing to hit new-home demand

Price falls across housing to hit new-home demand

24
0


House prices have started to decline around the country.

Residential property developers will have to rapidly adjust to slower sales as prices fall across all capital cities thanks to interest rates cleaving buyers’ borrowing capacity.

August housing figures from PropTrack showed all capital city markets recording falls from the peaks of the markets, with regional Australia falling at the fastest quarterly rate in 11 years.

AMP chief economist Shane ­Oliver expects home prices to fall 15 to 20 per cent top to bottom into the second half of next year as poor ­affordability and rising mortgage rates take a toll.

“If the cash rate pushes much beyond 3 per cent as many expect then price declines are likely to be deeper,” Dr Oliver said.

Consumers are now coming to grips with rapidly rising interest rates, resulting in anecdotal reports of lower foot traffic through display homes ­nationally.

Financial Services Council

AMP chief economist Shane ­Oliver. Picture: Jane Dempster

At the same time, it is a pressure cooker for businesses in the construction sector, as a combination of surging costs, supply chain shortages, wet weather and commitments push some operators over the edge.

The AiGroup and HIA Australian Performance of Construction Index rose 2.6 points to 47.9 points in ­August, but activity contracted for a third consecutive month.

The AiGroup and HIA said three of the four construction sectors – housing, apartments and commercial – were in contraction last month.

“Demand-side pressures – arising from rising interest rates and lower customer demand – are an emerging concern for respondents across all sectors,” they said.

Housing Industry Association chief economist Tim Reardon said HomeBuilder – which offered a grant of $25,000 to people opting to build – caused new building commitments to hit record highs last year.

Housing Industry Association chief economist Tim Reardon.

“Because of how strong sales have been through to June, there is a large buffer of work in the pipeline. We have a record volume of work under construction,” Mr Reardon said.

“We have a near record number of homes approved but have not yet commenced construction.

“The industry will continue to build capacity through until the middle of next year.”

But pressure continues on builders. Last month Queensland building giant Oracle Homes became the latest construction business to topple, leaving 300 homes unfinished across Queensland and NSW, and a debt of $14m.

It is one of several builders around the country to hit the wall in the past year, including Privium Homes, Condev and ProBuild.

The head of residential at Queensland-based developer Consolidated Properties, James

Consolidated Properties head of residential James MacGinley.

MacGinley, expects more businesses to struggle into the future.

“Unfortunately, there’ll be several industry participants who experience a current pipeline of unprofitable work and then a quickly diminishing future pipeline of any profitable stuff to come,” Mr MacGinley said.

“They’re all going to have to ask hard questions of themselves in the next six months as to what that forward pipeline looks like, and whether it’s worth continuing the unprofitable work that they’ve got on their books currently.”

It is not just builders struggling in the current market. Developers are choosing to shelve projects that are likely to be unprofitable, with no fewer than three towers affected on the Gold Coast, including Alegria.



Previous articleHow Kate Middleton’s Style Is Influenced by Queen Elizabeth II
Next articleCould Queen Elizabeth II Be the Last Queen of England?