Poor construction activity threatens economy

The recent slump in residential construction activity could result in a future housing bubble, RP Data’s chief executive officer Graham Mirabito has said.

Mr Mirabito said Australia currently faces a critical housing shortage that can only be resolved with government and council funding.

“Not only are we facing a critical housing supply shortage, but to make matters worse, we are also experiencing record migration and a baby boom,” Mr Mirabito said.

“Australia’s population is rocketing skywards and our construction activity is simply not keeping pace. On top of that, more than 65% of our population live in Sydney and Melbourne, so it is not just about turning dairy farms into properties. Something has to be done. If the government or local councils don’t step in now, we will be faced with a real problem come 2015.”

According to the Australian Bureau of Statistics (ABS), residential construction was down 3.9% in December 2009. The fall in new residential building work reflected a 3.3% decline in detached houses and a larger 5.3% drop in other residential buildings.

But despite Australia’s critical housing undersupply, it seems the country is still faring better than its US counterpart.

George Livermore, the chief executive officer of Core Logic – a subsidiary of the $6 billion a year company First American – said that the US property market was still seen as dire.

“We still have a lot of delinquent loans that need to be resolved. While low interest rates and various government funded programs are helping, there is still $9 trillion in outstanding mortgage debt,” Mr Livermore said.

“We are hoping the market will recover this year, but I don’t think we will start to feel the wind under our wings until at least 2012.”