Reserve Bank forecasts more property growth

August 13, 2014
Sean Willett

The Reserve Bank of Australia has painted a positive picture of the housing market but taken a slightly gloomier view of the national economy.

GDP growth is forecast to be a little below trend this financial year before returning to trend pace in 2015/2016, according to a Reserve Bank statement on monetary policy.

That is due to government budget cuts, the high Australian dollar and a decline in mining investment.

“These factors will be partly offset by the stimulus from low interest rates, which is supporting activity and prices in the housing market and also bolstering household consumption,” the report said.

The Reserve Bank said low interest rates, strong population growth and a retargeting of government grants had helped generate a “strong recovery” in housing investment.

Dwelling investment is expected to “increase noticeably” as a share of GDP.

“Forward-looking indicators of dwelling investment, such as approvals, commencements and work yet to be done, remain at high levels and will support growth of dwelling investment in coming quarters,” it said.

“Dwelling construction is expected to continue to expand later in the forecast period in response to low interest rates, strong population growth and only limited construction over the past decade.”

The report also forecast that the commercial property sector would help drive a modest increase in non-mining investment over the next year or so.

“The stock of work yet to be done – including a number of large healthcare and office building projects – will support non-residential construction over the next few quarters,” it said.

“However, non-residential building approvals have declined in trend terms since the start of the year, suggesting that non-residential construction will not be as strong in the near term as previously assumed.”

Posted in: Interest rates

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