Sky-high cranes, steam rollers and builders are all becoming familiar sights in Australia. Residential real estate construction is high, new homes are popping up in cities across the country and Australia is preparing itself for rapid population growth.
But who is driving this surge in brand new residential property construction? A new report from BIS Shrapnel points a finger at property investors and existing home owners.
The report, Building in Australia 2014-2029, predicts a positive outlook for residential construction in the future and shows the strength of this industry over recent years. The number of housing starts over 2013/14 grew by 14 per cent compared to the previous year.
The low interest rates for home loans have unlocked "pent up demand" and spurred on building activity. On top of this, population growth has been another main driver of residential construction.
"Investors and upgraders/downsizers are driving demand in this cycle," said Dr Kim Hawtrey, associate director at BIS Shrapnel.
"First home buyers are still largely on the sidelines."
Investors active in real estate market
Research from National Australia Bank (NAB) found local investors were very active in the national property market over Q2 2014. In fact, local investors accounted for one in three brand new property sales.
This was largely focused on inner city houses and low rise apartments. CBD apartments and inner city high rises were also two other major property types snapped up by investors.
Generally, this activity was strongest in New South Wales and Queensland, NAB found.
Strong building activity forecast to continue
New South Wales was pinpointed as the strongest state for new home building over 2014/15. Over this period housing starts are expected to rise by nine per cent, which will largely consist of investors buying real estate in Sydney. While this activity will help supply more homes, it will also play a part in aiding the recovery for the new home building market in the state.
Queensland and Victoria are expected to see a three per cent rise each over 2014/15. Real estate in Melbourne is forecast to be snapped up by more overseas investors, while both states will see a strong overall investor presence.
An "impressive overall national performance" for new home building is expected to occur from 2014-16. However, just like natural cycles go, what goes up must come down - or at least come to a halt.
BIS Shrapnel says a "correction to the cycle" will occur in 2016/17 when national building will drop by ten per cent.
