Housing starts dip to continue, with 5.9% decline forecast during 2012: HIA

Housing starts are likely to come in at 139,360 during 2012, according to the Housing Industry Association.

The HIA's autumn outlook confirms deteriorating conditions for the housing industry in the final quarter of 2011 and into 2012, and suggests subdued new home building levels for the remainder of the year.

Following a 12.8% fall in housing starts in 2011, HIA is forecasting a 5.9% decline in starts in 2012, to a level of 139,360. It anticipates a rise to 147,980 in 2013 and then to 158,290 in 2014. The recent peak was 169,860 in 2010. The recent low point was 138,790 in 2009, marginally weaker than this year's anticipated figure. The 2009 figure was the lowest since the GST-introduction affected 2001 year.

"New home building has been hampered by interest rates that have been too high for too long as well as a glacial pace of reform in terms of the supply-side of the Australian housing market," says HIA senior economist Andrew Harvey.

But the HIA pinpointed "excessive tax levied on new housing" as constraining supply and harming business conditions and therefore the wider domestic economy.

Harvey notes research that found that around 40% of the purchase price of a new home was due to taxation, and that the majority of this was in the form of highly inefficient taxes, including stamp duty.

"More is needed in terms of Commonwealth and state government reform to lift some of the tax burden from new housing – taxes on housing simply have to be substantially reduced," says Harvey.

"The economy is now posting zero employment growth, and the non-mining states are going backwards in terms of their labour markets - now is not the time to allow residential building to decline further," Harvey adds.