After a patchy start in 2011, the property market is tipped to regain steam in the second half of the year according to industry forecaster BIS Shrapnel.
According to its Building Industry Prospects report released on February 21, the total number of new dwelling approvals is expected to rise eight per cent to 177,000 in 2011/12 – the highest level since 2003/04.
“The increase in first home buyer demand from the Federal Government’s First Home Owner’s Grant Boost Scheme, together with various State Government incentives for new dwellings, resulted in new house approvals rising by 22 per cent in 2009/10,” Angie Zigomanis, BIS Shrapnel senior manager, building and construction said.
“However, these incentives only served to pull forward existing demand, with first home buyers who would have otherwise been in the market in 2010 entering the market in 2009 to take advantage of the increased incentives before they expired.
“As a result, there was a drop off in first home buyers in 2010, which has been evident by the decline in new house approvals through the second half of last year.”
The number of loans approved for first home buyers by June 2010 was almost nearly 60 per cent below the same period in 2009. With first home buyer demand well down, upgrader demand for new dwellings also eased as fewer potential buyers were in the market for their existing properties.
BIS Shrapnel is forecasting new house approvals to record a decline of 11 per cent in 2010/11. However, strong investor demand is driving further growth of 26 per cent in other dwelling approvals (private medium and high density dwellings), i.e. apartments and townhouses.
“With the lower level of construction since the Global Financial Crisis, supply has fallen further behind underlying demand, and there is a rising deficiency of dwelling stock,” Mr Zigomanis said.
According to its report, BIS Shrapnel also believe first home buyers will return to the market in larger numbers during 2011.
“Together with the pent up demand from the deficiency of dwelling stock, and an environment where economic growth is picking up and interest rates are stable over the next six months, demand for new houses will subsequently increase as upgraders also take advantage of the stronger demand for their existing dwellings and trade up to a new house,” he said.