With mining construction taking a backseat to exports in 2014, transport, commercial, and residential construction spending is expected to be on the rise in Australia. Low interest rates and improved affordable housing are likely to play a part in encouraging more housing starts in 2014.
With growing demands in the housing market, there is a sense of inevitability in the home construction sector. The Housing Industry Association noted that a housing crisis could prove unavoidable unless drastic measures are taken.
With that in mind, the Australian housing boom should continue throughout 2014. The only question is whether or not supply can keep up with the growing demand.
Housing Boom In Australia
2013 was the hottest year in the real estate market on record in Australia, according to Australia's Bureau of Meteorology. These trends attracted the attention of many buyers, both foreign and local. Consequentially, 2014 is anticipated to be another booming year for the property market in Australia.
A weak Australian dollar, high demand, short supply, and record low borrowing costs were the key factors that drove housing prices to a new high across Australian cities.
Median dwelling values took a dip in 2011 by 3.8 percent, and a further 0.4 percent in 2012. These record low rate cuts drew the interest of many first-time home buyers and investors.
In Sydney - the most pricey property market - house values increased by an astounding 14.5 percent. In Perth, values rose by 9.9 percent, and in Melbourne they went up by 8.5 percent.
Housing has quickly become a buyer's market in Australia. Foreign buyers - especially wealthy Chinese investors - have played a part in supporting this Australian property boom.
According to National Australia Bank's research, one in every eight new properties built in Australia were sold to foreign buyers in 2011.
Potential Issues Facing Australian Housing
With Australia's population growing at an above-average pace, a shortage in housing may remain the status quo unless immediate and drastic measures are taken. Official projections of population growth is expected to continue at a similar rate, according to The Housing Industry Association economist Geordan Murray.
The HIA also noted that a housing crisis may prove difficult to avoid unless an additional 30,000 homes are built each and every year.
High material and labor costs, as well as declining building and construction activities have been cited as potential challenges in trying to meet these demands as well.
RP Data senior research analyst Cameron Kusher noted that the main challenges for 2014 would likely be in determining how to regulate high levels of investor activity in addition to dealing with looming projections of unemployment growth.
Even with some of the imminent challenges facing the property market in Australia, 2014 is expected to be another significant growth year for housing.
The high-demand, short-supply climate underscores the idea that significant effort will need to be directed towards encouraging market correction, and for that to happen, residential construction spending will have to increase. Homes will have to be built at a quicker rate as well.