New home starts increased significantly in the March 2006 quarter, but serious questions remain about how long the recovery will last as further interest rate rises loom large on the horizon.
According to Australian Bureau of Statistics figures released yesterday, new home starts increased by 10.6% to 39,219 — 4% higher than in the March quarter last year.
However, over the 12 months to March 2006, housing starts were down by 3.3% to a level of 153,495.
Detached house starts increased by 4% in the March 2006 quarter to 26,221, a level 5.3% higher than a year earlier. Multi-unit jumped alarmingly by 25.7% to 12,479, a bare 0.5% higher than the March 2005 quarter level.
The Housing Industry Association said that the latest figures were an encouraging update on the new housing industry.
HIA’s chief economist Harley Dale said that despite the hefty rise, housing starts would be lower in 2005/06 overall.
“A big recovery in apartments and modest growth in detached houses has seen dwelling commencements get off to a healthy start in 2006, following a 12% fall over the second half of 2005,” Dale said.
“This situation for the March quarter was reflected in most states and territories and that is certainly a positive update for the housing industry,” he added.
“Housing starts are still trending down and we expect to see a decline of 5% in 2005/06 to around 148,400 starts.
“A recovery in 2006/07 is still on the cards, although the higher and more uncertain interest rate climate could well restrain that recovery,” Dale said.
Dale, however, said the concern is that with incessant speculation of a further rate rise, there is a risk that starts struggle to get much further than the 150,000 mark next year, a level still well down on the 160,000 homes required to satisfy underlying demand.
On a state-by-state basis, the number of housing starts increased everywhere except in Queensland and the Northern Territory. Starts were up by 42% in the ACT and rose by 41% in New South Wales, 29% in South Australia, 8% in Tasmania, 7% in Western Australia, and 1% in Victoria. Starts fell by 8% in Queensland and were down by 47% in original terms in the Northern Territory (24% lower than a year earlier).
By Kathryn O’Meara
