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Conditions falling into place for 2024/25 residential building upturn
Updated residential data and forecasts now available
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The latest data show the conditions are being put in place for the next upturn in residential building starts, which is expected during 2024/25.
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The key leading indicators are now moving into positive growth territory (see chart below). The number of monthly loans for new dwellings to owner occupiers and to investors are now both solidly up over a year earlier, as is the number of grants to first home ownes (which only applies to new dwellings).
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Furthermore, the backlog of work still to be done on residential building is consistently falling, which means that capacity within the building industry will become available for an increase in starts.
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A key factor in the timing of the upturn will be interest rates. We expect the first reduction in rates to occur before the end of calendar 2024. Demand for dwellings is high, due to record levels of immigration, but affordabiilty is poor. Along with lower interest rates, a normalisation of building cost inflation is expected during 2024/25, which will mean a better ratio of house values to building cost.
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We expect a gradual upturn in 2024/25, with weak economic conditions and poor household confidence limiting the upturn initially. We expect a total increase in dwelling approvals of just less than 10% in 2024/25, then accelerating to arond 20% in 2025/26 (see chart below).
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We expect the upturn to be driven by houses and 4 storey-plus apartment buildings. We expect a strong representation in this growth by more affordable dwellings, including social housing and build-to-rent projects.
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If your organisation requires help with construction sector forecasts or project cost escalation forecasts, please get in touch with us, at info@macromonitor.com.au.
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Our most recent reports:
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Australian Construction Cost Trends
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This report examines the outlook for construction costs, in detail be sector and type of input.
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Australian Construction Projects Database
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This latest list of projects corresponds with our fully revised set of forecasts published in November 2023.
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Australian Regional Construction Outlook
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Our latest regional forecasts for residential building and construction have just been released.
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Australian Construction Materials Forecasts
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Our latest forecasts assess the implications for construction materials demand of the current outlook for building and construction.
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Australian Road and Bridge Works
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This report examines the strength and composition of the current upturn, and determines the likely timing of the peak, and subsequent decline.
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