The bad news might be coming to an end for the residential and commercial building sector, with industry experts predicting a recovery in the building industry.
Buffeted by economic headwinds, banking royal commissions and poor headlines, the Australian building industry finally seems to be bouncing back.
After two fairly disastrous years for construction, economists are now predicting a stronger housing market in 2020/21 and an even healthier performance in the non-residential property sector.
But is the building industry really out of the woods?
Robert Mellor, Managing Director of BIS Oxford Economics, is confident that the worst is behind us and that Australia is well positioned for a full recovery.
“Strong population growth, a rising national dwelling stock deficiency and housing stimulus are set to provide considerable support to the residential building and renovation sectors, while non-residential building is projected to remain elevated,” he says.
“Total building activity is anticipated to climb near its previous peak over the coming five years.”
Not all commentators are quite as bullish, warning that while demand for new detached homes has held up well, the apartment market in cities such as Sydney, Melbourne and Brisbane is still under enormous strain, with new projects down 40 per cent over the past 12 months.
HIA’s chief economist, Tim Reardon, believes that after some spectacular falls, the housing market has now stabilised – helped by government stimulus policies.
“Interest rates, income taxes and lending restrictions have all been eased in an effort to support activity and economic growth,” he says. “Government investment in infrastructure is also important to support labour market growth. These measures are now supporting activity in housing markets across the economy.”
While economists may disagree about the timing and the strength of a housing recovery in Australia, there is a general consensus about the factors that have impacted so negatively on building activity across the country.
Already weakened by the fallout from the banking royal commission, public confidence in the residential housing sector has been further undermined by high-profile evacuations from three new developments in Sydney, two of them high-rise apartment blocks.
In addition, concerns about the safety of apartment blocks following the Grenfell fire in London has led to problems with liability insurance and building certification.
Denita Wawn, CEO of Master Builders Australia, has warned that Australia is in the midst of a “building certifier insurance crisis” which, if not addressed, could delay many new apartment developments across the country.
Master Builders is urging state and federal authorities to hammer out a resolution – and restore public confidence. “We need all governments to come together now to manage what has become a risk for the whole industry, caused by the use of combustible cladding on some buildings,” she says.
But Selina Short, from the global EY property group, says that rather than governments overhauling the certification system, individual developers need to step up and address buyers’ fears about the safety of their buildings.
“It’s clear that people are delaying property-purchasing decisions,” she says. “This adds another layer to the softening property market.”
Talk of a full-scale recovery in the housing market could be a little premature but the worst might now be over.