BIS predicts residential construction comeback in 2009

BIS forecasts a 10% rise in new dwellings, claiming it will be the first calendar year of growth since 2002.If the federal government’s first home owner boost scheme is extended to the end of 2009, the forecaster says detached house construction recovery will build, with a possible increase in funding availability for apartment development in the latter half of next year.However, BIS senior economist Jason Anderson says the number of affordable apartments coming onto the market is likely to decrease in the first half of 2009, due to the credit squeeze, making it difficult for developers to acquire the necessary financing to fund larger projects.Extending the current first home owner boost scheme beyond its deadline of mid-2009 would provide greater economic benefits than tax cuts, Anderson says.Additionally, alleviating housing shortages would reduce rental market pressures, with rental costs predicted to increase by 10% next year, if pressures do not ease.“BIS Shrapnel believes it makes sense to target the policy stimulus at housing construction, considering the substantial pent-up demand for new dwellings,” the company said.However, the boost scheme is unlikely to drag Sydney out of its financial doldrums, with BIS anticipating construction to remain below underlying demand. To combat this, BIS says the state government needs to begin reducing development levies, which will improve finance conditions for developers.On the other hand, the boost scheme will stimulate regional Victoria’s residential construction sector. The Victorian government also offers an additional $3000 to first home buyers who purchase a new dwelling in regional areas.The boost scheme is also predicted to have a positive impact on residential construction in Queensland, South Australia, Western Australia, the Northern Territory and the Australian Capital Territory.

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