Forecasts differ on Treasury’s tip of 3pc fall in housing construction

Housing construction is expected to decline by 3 per cent in 2003, according to Federal Treasury, reflecting a “significant” fall in new dwelling investment, partly offset by continued spending on alterations and additions. In the past, activity in new construction has moved in line with the alterations sector but this link will end over the next year, Treasury claims. It will be principally due to the phasing out of the higher new home first homebuyers' scheme.

Access Economics has a different view and is predicting that the new housing sector will grow by 5 per cent next year, underpinned by continuing confidence and low interest rates. Economist Chris Richardson said that Access believes that interest rates are of more significance than the first homebuyers' grant.

BIS Shrapnel's Robert Mellor stated that Treasury has made a conservative forecast and he thinks there's more “downside risk than upside risk”. BIS is predicting a 5 per cent decline in the new housing sector, balanced by a 3 per cent growth in alterations and additions. The boom in new housing has been stronger than predicted but the decline will be much sharper, Dr Mellor said. While pent-up demand is emerging in NSW and Queensland, and there's a big shortage of properties in Victoria, and all of the smaller States except the Northern Territory will experience significant oversupply as a result of the current boom, he stated.

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