HIA upgrades housing starts forecasts, but warns industry still has a long way to go

The Housing Industry Association has amended its forecasts for housing starts in the year ahead, saying it expects the current financial year to result in just 141,000 new starts, well below demand.

However, the prediction comes as housing finance and approvals figures have been improving over the last few months, with the latest interest rate cuts expected to spur some activity.

HIA economist Harley Dale told SmartCompany this morning the group is now forecasting a 10.4% decline in starts for 2012, “recognising clear downside risks for the forecast” given the situation in Europe.

“It’s roughly the same forecast we’ve had the whole year, give or take a thousand starts or so, but there’s been some upwards revisions on the previous financial year on the part of the ABS and we’ve made some modest amendments to our regional forecast.”

“Our aggregate forecast is within that area of 141,000 starts for the current year.”

There is some improvement expected in 2012-13, Dale says, when the organisations forecasts a 6% rise in starts to reach about 149,000.

But overall, Dale says that’s coming from a low base and even then, housing starts will need much more activity in order to cater for demand.

“We’re looking at an increase of around 6% for that year, and that’s following two consecutive years of declines.”

“But to put that into perspective, we’re talking about forecasts that would put housing starts in the 140s. A 6% rise gets you just under 150,000, and the underlying demographic demand is running at about 175,000 dwellings per year.”

The lack of housing starts has been a point of contention in the industry, especially as more construction providers collapse into insolvency as the industry suffers the worst number of insolvency appointments.

“It’s better than further declines,” Dale says. “But there’s still a long way to go to get to the levels on par with the requirement for the growing population.”