Home construction set for 5.2% growth
The home construction industry is set for solid growth in 2013-14, but a number of factors have hindered builders' performance over the last five years.
This is according to new analysis by IBISWorld, which highlighted several competing issues that could cancel out revenue gains in the sector.
IBISWorld figures have forecast housing construction will generate $42.8 billion this financial year, with new investment boosted by lower interest rates and pent-up underlying demand for accommodation. The base interest rate is currently at a record low of 2.5 per cent after the Reserve Bank of Australia made several reductions over the last two years.
Sebastian Chia, industry analyst at IBISWorld, said there are several growth opportunities nationwide, including the reconstruction of homes destroyed in the 2011 Queensland and Victoria floods. This will provide much-needed stimulus for builders operating in these states, he explained. However, the research noted growth was flat over the last five years due to problems with the global economy.
Mr Chia said: "Robust population growth has fuelled underlying housing demand since the late 2000s, but unfavourable housing affordability and low consumer and business confidence, have contained investment in the aftermath of the global financial crisis."
He added that high household debt levels and continuing issues with the expense of home ownership are likely to constrain investment growth into new housing construction in the future.
The IBISWorld report also identified trends in the current structure of Australian construction businesses, stating that the industry is very fragmented. In fact, figures showed less than 2 per cent of organisations employ more than 20 people, while close to 60 per cent of contractors are sole traders or partners.
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