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Residential building is a volatile segment of construction activity. It is sensitive to general economic conditions and shocks such as interest rate changes. Preceding the introduction of The New Tax System in July 2000, a substantial amount of construction activity was brought forward, peaking in December quarter 1999. A severe downturn followed this peak, but was quickly reversed by a combination of historically low interest rates, government incentives (e.g. The First Home Owners Grant) and strong underlying demand for new dwellings.
A residential building is a building which is predominantly used for long-term residential purposes, and can contain one dwelling unit (e.g. house) or more than one dwelling unit (e.g. flats).
Residential building construction depends on the demand that exists for new places of residence. When the population is expanding rapidly the level of residential construction tends to increase in order to meet higher demand for new homes.
The willingness of individuals and investors to undertake residential building construction is affected by the interest rate and the economic climate. During times of economic expansion and/or low interest rates, individuals and investors are more willing to invest in new residential buildings than in periods of economic decline or high interest rates. Other factors which affect investment are the cost of land, labour and building materials. All of these are affected by the prevailing economic climate.
Residential construction statistics are used by government and private organisations. The housing industry uses building statistics in forecasting the demand and supply of new housing. The government also uses forecasts of residential building activity as one input to determine future policy regarding residential construction in the overall economic context. The statistics are also used to compile the dwellings component of gross fixed capital formation in the national accounts, which forms part of the expenditure measure of gross domestic product (GDP) as well as being shown in the capital account.
The ABS produces a range of statistics relating to residential building, including statistics on the number and value of approvals during a period, the number and value of commencements during a period, and the value of work done during the period. The series are closely related, with approvals tending to lead commencements and work done.
The housing sector is seen to be a leading indicator of the general state of the economy. Because housing is seen as a basic requirement for all Australians, there has been a continuing demand for more houses as the population has grown. As economic conditions become more favourable, the housing sector is one of the first areas to strengthen as pent-up demand becomes realised.
Building Activity, Australia (8752.0)
Provides quarterly estimates on number of dwelling units and value of residential buildings, value of alterations and additions to residential buildings and value of non-residential building by class of building, stage of construction, value of work done during period and value of work yet to be done; for each State and Territory and for private and public sectors for Australia.
Building Approvals, Australia (8731.0)
Contains monthly information on the number of dwelling units and the value of residential building approved for the private and public sectors.