Top reasons why home building remains strong

Home building has been one of the standout performers of the national economy over recent months, picking up some of the slack left behind by the mining sector. This situation has apparently persisted as the country moves into the final few months of the year, as those seeking home loans are keen to get their hands on brand new properties.

There is no shortage of reasons why home building is thriving at the moment – here are just three of them.

Investment activity is especially high

Investors play a key role in the overall success of the property sector, which is why many groups were opposed to the Australian Prudential Regulation Authority’s plans to limit finance. Nevertheless, the Housing Industry Association (HIA) believes it is investors who are showing the greatest appetite for new homes, and it’s leading to an upswing in activity.

HIA Economist Diwa Hopkins noted that investors are “contributing a larger share of new housing supply than has historically been the case”. This has occurred despite attempts to kerb property investment loans, showing many investors simply won’t be deterred.

Leading indicators suggest rising construction levels

There are many nationwide indicators of construction activity, with one of the most prominent being the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI). The latest release showed the PCI increased 6.7 points in August to reach a reading of 53.8 – anything above 50 points to an increase in activity.

Apartment building emerged as the strongest performer, suggesting homebuyers throughout the nation are still showing a preference for high-density living.

Plenty of work in the pipeline

Australia is also in the enviable situation of not just having projects underway, but also a decent pipeline of work that’s yet to begin. Master Builders Australia commented on official data, which showed approvals for new buildings were up 4.2 per cent in July.

Chief Economist Peter Jones noted 223,000 dwellings had been approved during the 12 months to July, so the sector has plenty to keep it going, at least for the time being.