The Australian residential building industry is seeing tougher conditions, according to the most recent National Survey of Building and Construction. 

The Activity Index for Residential Building fell to 55.0 points in the September 2018 quarter compared to 59.8 points in the previous three-month period. The survey’s Expectations Index also fell by 1.9 percent during the September 2018 quarter. 

“This suggests that those in the industry anticipate further weakening over the coming six months,” says Shane Garrett, Master Builders Australia’s chief economist. 

“Residential building is being hit by tighter finance availability as well as the softening of house prices in Sydney and Melbourne over the past year. These factors are likely to drag new home building lower over the next few years.

“It has always been a struggle to consistently deliver enough new homes to meet demand. This has resulted in house prices steadily outgrowing wages and incomes over many decades. Policy settings need to ensure that we can build enough new homes to accommodate a growing economy and a larger workforce.”

According to Garrett, new modelling from Cadence Economics shows proposed restrictions on negative gearing and capital gains tax would result in up to 42,000 less new homes being built over a five-year period. 

“[This is] enough to house over 100,000 ordinary Australians,” says Garrett. 

“These latest survey results show that residential building is already cooling. We don’t need to weigh it down even more.”