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Medium density housing could be a good building industry prospect

13 December 2018

It seems companies in the building industry and businesses associated with it would do well to focus their attention long term on medium-density housing.

At a recent Economic and Social Outlook Conference organised in conjunction with The Australian and the Melbourne Institute, such housing was seen as part of a fundamental shift under way in the property market.

It was predicted medium density housing would have a rosy future ensuring the property sector would be reasonably strong long term. 

Furthermore, latest available figures show Adelaide is the nation’s top performing capital city for property price growth.

An ageing population’s role in this

Rising immigration and birth rates have pushed annual housing starts from 150,000 to between 175,000 and 180,000 Nationally, and baby boomers have been downsizing from large, detached houses – a phenomenon certain to become more common because of Australia’s increasingly elderly population.  It ‘s a situation from which SA would benefit even more were it able to increase immigration now lagging behind other States.

In the years ahead, an increasing percentage of homeowners is expected to want attractive, easier to maintain properties, a promising prospect for anyone interested in medium density housing.

CSR is one of Australia’s biggest building materials companies and its chairman John Gilham told the Outlook conference that while this type of housing was one of the most volatile sectors of new housing it also represented the least amount of value per unit.

He said most dollar value was found in detached housing which had tended to be steady.

“You’ve got 10 million existing homes, but the fact is people don’t necessarily want to live in 60-year-old houses any more.  So what does that mean for construction? Over the long cycle and looking forward five to 10 years, the prospects are pretty strong.”

Justification for optimism

Mr Gilham said there was “a lot going on at the moment that would justify Australians being optimistic about the future”.  The number of hours worked was rising which meant there would be an increase in disposable income, proof of a positive economic outlook.

Catherine Tanna who is Energy Australia’s managing director and a Reserve Bank of Australia board member agreed. She said a softening in house prices would be a welcome increase to affordability and should not be seen – as many people also see the rise in part time jobs across the economy – as a negative

Given these speakers’ optimistic views, especially where they relate to housing’s future, SA would seem already to be well placed with Adelaide as the nation’s top performing capital for property price growth.

According to CoreLogic’s Hedonic Home Value Index Adelaide dwelling values rose 0.5% over the three months to the end of August, the biggest capital city increase; and for the year to date, Adelaide’s 1% growth has been headed only by Hobart and Canberra.

Real estate authorities tell Macks Advisory that local and interstate buyers don’t seem to be worried by talk of impending rate increases and are making Adelaide a strong competitor in the National property market.

It’s an opinion that seems to align with the latest NAB Residential Property Survey which indicates Adelaide property values are likely to experience further growth in the months ahead and be followed by a 1.7% increase next year – similar to Hobart’s forecast rise.

However, the forecast for a combined average of property values for the rest of Australia in this period, is a decrease of 0.1%.

Property values reflect economic trend

ANZ’s Stateometer report reveals SA’s economic activity is above trend while the performances of other States are declining – with the exceptions of Tasmania and the ACT.  It thus mirrors the Index of dwelling values referred to above in bolstering optimism for the future of SA’s building and construction industry.

Senior ANZ economist Cherelle Murphy says SA’s employment rate is expected to fall to 5.5% by June next year (down from 5.6% at the end of the last financial year).

She reports that anecdotally there are lots of jobs being created in the health and construction sectors, and there is a build up of anticipation linked to job increases in ship building and other defence projects. 

“SA’s change of government also seems to have been approved by businesses, and companies generally are more confident here than in other States.”

Disclaimer: The information contained in this webpage is general information and does not constitute legal advice. Nothing in this webpage is or purports to be advice. If you do need advice, then you ought to seek and obtain appropriate personal professional advice based on your personal circumstance.

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