The National Outlook, Australia’s most comprehensive housing report card forecasts new home building to reach its second highest level on record in 2014. The report was released by the Housing Industry Association, the voice of Australia’s residential building industry.

According to HIA Chief Economist, Dr Harley Dale, residential construction investment will make strong contributions to Australia’s economic growth this year and next, and will boost demand across significant parts of the manufacturing, retail and supply/distribution sectors.

He noted that residential construction was making a vital contribution to the rebalancing of growth in the nation’s economy. Dr Dale explains that the challenge for policy makers is to look beyond the cyclical recovery and address the large and highly inefficient tax and regulatory barriers afflicting Australia’s new home building sector. He warns that a failure to do so will see Australia come up short in adequately housing its growing and ageing population in the decades ahead, to the detriment of living standards, productivity gains, and budgetary savings for federal and state governments.

New dwelling commencements are forecast to increase by 7.1 per cent in 2014, following growth of 10.9 per cent in 2013, reaching a peak of 180,000. Commencements are forecast to decline in 2015 and 2016 to a level just under 170,000. On a fiscal year basis, commencements are expected to increase by 10.3 per cent in 2013/14 to a peak of around 178,700. Modest reductions over the subsequent three years are forecast to see commencements bottom out at around 170,700.

Dr Dale sees a huge upside potential for renovations activity, explaining that two consecutive quarters of growth through to March 2014 provides confidence for HIA’s forecast of 1.0 per cent growth in the total value of renovations investment in 2013/14.