Housing slowdown or not, apartment construction projected to crash

Photo by Oli Scarff/Getty Images

The residential building cycle has already peaked with stand alone house construction slowing down. For apartments, construction is also set to slump, according to projections from Housing Industry Association.

It is forecasting that multi-unit dwelling starts will see an annual decline of 11.3% this year, after which the falls will be significant. The association anticipates these commencements will decline by around 25% in 2017/18, and then by a further 12% in 2018/19, which is projected to be the low point of the cycle for multi-unit construction.

As this chart below shows, 2018/19 commencements at 68,400 will be the lowest since 2011/12, the period just before house prices took off. Sydney home prices for instances have climbed 75% since June 2012.

The slowdown comes as regulators have continued to warn about the wave of apartment completions that are hitting the inner city markets of Brisbane and Melbourne, and to a lesser extent Sydney. As the chart above shows annual multi-unit dwelling starts more than doubled between 2012 and 2016.

Stand alone house starts are relatively more resilient though as this chart shows.

Detached house commencements are forecast to ease by 1.7% in 2016/17 ahead of a further decline of 7.3% in 2017/18. After falling to a low of 104,800 starts in the 2018/19 year, the level of detached house building is forecast to gradually improve across the out years of the forecast horizon, according to the HIA.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.