“After a long and sustained boom, residential building activity in Victoria is cooling,” says Fiona Nield, Housing Industry Association (HIA) Executive Director, Victoria. Her claim featured in a recent media release from the Melbourne-based branch of HIA Victoria, on the back of the quarterly economic and industry outlook report for the state. According to the updated forecasts for activity within the construction industry over the next four years, including new home building and renovations, the growth cycle Victoria has enjoyed has officially come to an end.
“Victoria experienced a new home building upswing that has spanned five years, taking activity to levels well above previous peaks,” says Nield in the HIA media release that first outlined the recent positivity in the building industry, then explained the shift the local housing industry was about to take.
One of the contributing factors behind the predicted cooling of Victoria’s residential building market is the tightening around mortgage applications that is making it more challenging for some potential buyers to get finance approved.
“We have been watching leading indicators of home-building activity soften since it became evident how significantly the home-lending landscape had changed,” says Nield. “APRA initially introduced regulations designed to curb high-risk lending practices, but the actual changes in the lending environment go above and beyond this. Ordinary home-buyers now find themselves facing some constraints accessing finance.”
What Nield describes as “slower processing” and “a reduction in lending” is, something, she says, that will have a dramatic impact on the housing market. It’s an impact on residential building activity that will become, Nield says, more evident as we progress into the new calendar year in 2019.
“We expect a downturn in new home building to begin in 2018/19, with new home starts forecast to fall by 34.8 per cent from their recent peak by 2020/21. This would leave total housing starts at just under 50,000 homes in 2020/21, not too far below the average of the past decade,” she says.
The positive news, though, says Nield, is that Victoria is in a solid position to withstand the downturn and with the local labour market in a strong position and consistent population growth continuing to fuel more housing demand, looking on the bright side, rather than focusing on potential negatives is one way to face the new year with confidence. Property markets around the world often go up and down but if potential buyers remember that what does cool will always, eventually, start to heat up again, making decisions about the right time to sell or buy property is something that should always be done with appropriate research and input from trusted property investment specialists and lending experts.
To find out more about applying for a mortgage to secure your own stake in the changing property market while prices are dropping, talk to our mortgage broking experts at Lending Specialists today.