The HIA suggests the housing sector will become less of an economic driver of the Australian economy, and also underscores the various regulatory interventions from state taxes, to limiting foreign investment and investor lending.
Another plank in the argument that the housing party is over, leaving households with a mighty debt driven hangover.
According to the HIA, the Winter 2017 edition of the HIA’s National Outlook Report discusses the downturn in building activity that started in March 2016 and forecasts the length and depth of the cycle. It also highlights the role foreign investment plays in growing housing stock in Australia.
“The housing sector has already stepped back from its role driving the Australian economy and now is not the time for governments to hit the industry with punitive charges,” warned Tim Reardon, HIA’s Principal Economist.
“Government interventions into the market so far include: state governments imposing punitive Stamp Duty charges on foreign investors, Federal charges for foreign investors, a new set of visa rules that could slow overseas migration, restricting lending to domestic investors and new regulations limiting interest only lending.
“The Chinese government has also imposed restrictions on capital leaving the country which may have a significant impact on Australian home building.
“Foreign investors have been attracted to the Australian housing market and they have been investing billions annually in the construction of new residential dwellings.
“These investors have contributed to activity and employment in metropolitan areas building the supply of new housing stock and easing pressure on rental markets.
“Governments of all jurisdictions should proceed with caution when imposing new punitive measures on this segment of the market.
“Foreign capital is highly mobile and if it is forced from the market rapidly it could accelerate the downturn in the sector unnecessarily.
“A number of state governments have recently hit foreign investors with punitive charges.
“The Australian Government has also imposed additional regulations that will impact on investors in the sector.
“The HIA is forecasting that building activity will decline modestly – from record highs – over a number of years, consistent with typical cyclical trends in the industry. Activity will bottom out in 2019 with activity still at solid levels.
“There is a risk – if uncoordinated and poorly considered policies are introduced to curb foreign investment – that the decline in activity in the sector will be accelerated,” Mr Reardon concluded.
