Residential building recovery - 2009

Extended First Home Owner Boost Scheme would help address shortage of rental properties.

Residential construction is forecast to be a key support for the Australian economy during 2009, according to leading industry analyst and economic forecaster, BIS Shrapnel.

The national number of dwelling starts is forecast to rise by 10 per cent next year, which will be the first calendar year of growth since 2002.

BIS Shrapnel believes that if the Federal Government’s recent First Home Owner Boost Scheme is extended until at least December 31, 2009, then in addition to there being more substantial momentum in the recovery in detached house construction, there would also be an improvement in the funding availability for apartment development in the second half of 2009, which would help alleviate the current rental crisis.

BIS Shrapnel senior economist, Jason Anderson, says there is likely to be a reduced number of affordable apartments on the market over the next six months.

“Given the current difficulties for developers to get finance for medium or high density unit/apartment development, we do not expect them to be in a position to schedule additional construction, even if they do see increased sales to first home buyers,” he says. “The First Home Owner Boost Scheme is scheduled to end on June 30, 2009, and it will be difficult for many projects to resolve financing issues over the next few months.”

As a result, BIS Shrapnel expects the impact of the Boost Scheme as it stands will be nearly totally concentrated on new detached houses.

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