The 2015 Forecast For Australia’s Housing Industry

How will the housing industry of Australia do this year? There are some forecasters that have already publicly predicted that interest rates will be cut this year. Early last year, the forecast for rates to increase was before the middle of 2014. The financial market is now pricing in the next move to be down.

The landscape of the federal government’s budget has deteriorated by more than what was expected. This was largely due to additional write-down of revenue and also due to the greater than usual intransigence of the political faction. Last December’s Mid Year Economic and Fiscal Outlook, the deficit that was cited reached to about $40.4 billion and it is more than $10 billion higher compared to the forecast last May Federal budget. The total deficit in the last hour years has already risen to about $103.9 billion. The figure is an increase of $43.7 billion since last May. This deteriorating position in budgeting has certainly dragged the businesses and consumer sentiments down. The other areas of weakness have already prevented any kind of recovery from accumulating any traction.

The major key areas of weakness include the price shock of commodities last year which runs further; the rise in the unemployment rate, with significantly increase number of unemployment among young people and the weak growth of household income. These circumstances mean that the expenditure in households as well as business investments is very weak.

Recently, the national home building activity is the healthiest area of domestic demand. The number of new homes has significantly increased by at least 12 percent. This rate was slightly higher than compared to the 11 percent growth rate in 2013. There are two impressive aspects of this result. First is the estimated level of commencements last year which tallied 188,020 and was the highest record so far. It surpassed the 187,000 dwellings which was started last 1994. Second is the back to back growth in 2013 and 2014 which is the first time since the early 2000s.

Along with this trend, the sector of Perth renovations as well has improved and is expected to take off within the year.