ACT Housing Market is the Tightest in the Country

Posted 30 July 2018

ACT Housing Market is the Tightest in the Country

ACT Housing Market is the Tightest in the Country

 

The June 2018 Master Builders Australia Industry Forecasts have been released confirming what many ACT businesses know - that it is a very positive time to be working in the local construction industry.

In 2016-17 the ACT economy was the fastest growing in the country. The official statistics are yet to be released but 2017-18 is shaping to be an even better year. The labour market is sprinting, unemployment is the lowest of any state or territory and employment growth in 2018 is expected to be upwards of 3.5 per cent – a full percentage point higher than the national average.

Better still jobs growth is in high skilled and high paying jobs – in cyber security, defence and intelligence, and private, government servicing consultancies.

The latter has meant the rental market in the ACT is the tightest in the country. Vacancy rates are 0.5 per cent and the price of an average 3 bedroom rental is about $100 per week higher than in Melbourne. Rental growth was 5.9 per cent last year which is more than double the growth in average wages.

As a result housing affordability is perhaps a bigger issue in the ACT than in most other jurisdictions. Regulatory constraints which limit new housing supply and push up land costs are the biggest impediment to improving housing affordability in the ACT.

There is speculation that there may be an oversupply of apartments in the ACT market. In part, this may be true – it is likely that 2 bedroom apartments have featured too heavily in the composition of new supply. The latter should be a consideration for planners. But with rents rising faster than all other capital cities besides Hobart and vacancy rates near zero, the underlying market fundaments do suggest supply is still very constrained.

The value of new residential building work increased by 22.8 per cent in 2017 and is expected to grow by a further 3.7 per cent in 2018.

This should take some pressure off living costs, but with population growth running hot it is important that this momentum is maintained.

The forecasts for new dwelling starts in 2019 project a fall of around 12.4 per cent (equal to around 600 new dwellings). Without a boost to the pipeline soon, there is a risk that the approaching downturn in new housing supply will put unwanted upward pressure on housing affordability.

Engineering construction lifted by over 25 per cent in 2017. However, this was pretty much all due to one project – the $700 million Capital Metro project.

The latter is the largest single engineering project ever undertaken by the ACT Government. This project accounts for more than $3 in every $4 of projects planned and under construction in the ACT engineering sector. There is however some speculation that other works are being crowded out, with proposed projects like the new Civic Stadium being pushed back.

Non-residential building is also slated to record one of the strongest years in terms of growth in 2018. Building approvals have almost doubled in the past year, which should eventually flow through to more future work. In terms of project activity, construction on the $220 million Union Court Revitalisation at the Australian National University was interrupted by flooding in late February.

The MBA Industy Forecasts for the ACT can be viewed by clicking here.

The MBA Industy Forecasts for Australia can be viewed by clicking here.

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