Australia's housing investment 'won't fill' GDP gap from mining slowdown
Bank points to lack of first-house buyer activity and declining residential sales in Australia
Australian housing investment is unlikely to fill the void left in the nation's economic growth by a slowdown in the mining industry, says JPMorgan Chase.
A dearth of first-home buyer activity and a decline in home sales over the past decade meant housing would contribute less to gross domestic product than the losses from a slowdown in mining investment, Ben Jarman, a JPMorgan economist, wrote in a report on Monday.
"In the context of a very large and disappearing growth contribution from mining capex (capital expenditure) of around two percentage points," the magnitude of the "upside" from housing falls short, Jarman wrote. "Even in an ambitious scenario, dwelling investment would add only 0.5 percentage points to GDP over 2013. And even in that case, the lags could be such that these gains do not materialise until 2014."
Banks forecast home-price growth of less than 5 per cent this year after two years of declines, compared with a surge of 11 per cent in 2009.
The Reserve Bank of Australia in February predicted a "below trend" rise of 2.5 per cent for GDP this year, down from an estimate of 2.75 per cent in November, as mining investment peaks this year and the Australian dollar's strength weighs on manufacturing and exports.
Demand for housing from first-home buyers remained lacklustre, keeping potential buyers up the chain from taking on more debt and boosting credit growth, Jarman wrote. Lack of new construction had pushed housing investment as a proportion of GDP down by 1.5 percentage points in the past decade, he wrote.
First-home buyers accounted for 14.4 per cent of all home loans in February, compared with 17.4 per cent a year earlier, according to the statistics bureau. Building approvals rose a seasonally adjusted 12.8 per cent in the 12 months to February 28, government data show.
"To bank on dwelling investment making a large contribution to GDP is therefore to bet against a clearly defined trend," Jarman said. Building approvals would have to rise 20 per cent to lift housing investment by more than 10 per cent and GDP by 0.5 per cent this year, he said.