Following a reasonable 2010, indications are that the new home building recovery will reverse in 2011, says the Housing Industry Association (HIA) in a statement on Dec 16.
"The door is being slammed shut on residential building in 2011 through the triple negatives of rising interest rates, tight credit conditions, and a stalled housing policy reform programme," said HIA chief economist Dr Harley Dale.
"The combined weight of these adverse influences means Australia is likely to again endure a substantial weakness in new home building conditions. This will have flow-on effects across the whole economy.
"Of greater long-term concern, Australia's housing shortage is growing year after year, and even in a more favourable 2009/10 financial year we still added to the cumulative housing supply gap because as a nation we are continually under-building."
HIA Economics has updated its projections of the underlying demand for housing, and the results show that with around 161,780 dwellings completed in 2009/10, Australia still fell short of the underlying demand for more than 184,000 dwellings. Australia fell short by more than 22,000 dwellings in 2009/10 alone, and the annual shortage is estimated to be 16,800 dwellings in 2010/11 and 21,000 dwellings in 2011/12.
"Over the medium to longer term, the undersupply of new housing will contribute to a further deterioration in housing affordability for aspiring home buyers and for those in the rental market," said Dale.
"The COAG reform agenda may deliver future benefits, but the supply crisis is upon us now. HIA is calling on the Federal Government to urgently re-engage in housing policy reform.
"A pressing concern is the on-going dire lack of finance available for residential projects. The credit crunch is a major constraint on new home building activity.
"Given that new housing is one of the most heavily and inequitably taxed industries in Australia it is essential that the upcoming taxation summit delivers bold and effective policy reform," added Dale.
Meanwhile the renovations sector is looking a little less healthy than it did earlier in the year.
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