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The downturn in the level of home building activity will be contained in the next two years, as long as migration policy is not tightened further, the HIA has said.
These findings come on the back of HIA releasing its quarterly economic and industry outlook report.
HIA chief economist Tim Reardon said that the market is under pressure.
“In 2018, market confidence fell away as dwelling prices corrected, adversely impacting all segments of the market. Investors and owner-occupiers are delaying purchase decisions and foreign investment has also fallen dramatically for numerous reasons.
“An additional and unanticipated factor that emerged in 2018 was the credit squeeze created as banks reduced the amount of money they are prepared to lend each customer.
“The impact of the credit squeeze will moderate over the first half of 2019, as the market adjusts to these new limits.”
Mr Reardon said that the pipeline of building work has expanded over recent years, and the backlog is being reduced.
“If the leading indicators do not improve in the first half of 2019, then the pipeline of building work will be exhausted at a concerning rate.
“Builders in markets with a significant volume of work in the pipeline — such as Melbourne — have not been affected by the downturn yet, but other markets that were already performing poorly — such as Perth — have seen their market fall to a new historic low point.”
He said that the impact of the credit squeeze does not warrant a material downgrade to HIA forecasts.
“The strength of the economy supports building activity as it recalibrates to more traditional levels,” Mr Reardon said.
“The building industry, which has driven activity in the rest of the economy for the past five years, is now reliant on the strength of the rest of the economy to deliver an orderly downturn.
“The expectation that governments will not constrain net overseas migration is central to this outlook for a contained downturn. If the fall in overseas migration accelerates then interest rate cuts are likely to be necessary in order to mitigate the adverse impacts of this home building downturn on the wider economy.”
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