A new study shows construction of new houses could fall by 40 per cent in Victoria by the 2020-21 financial year, but Ballarat developers remain optimistic regional cities will be sheltered from the fallout.
Statistics from the Housing Industry Association note given current circumstances, forecasts expect housing starts in Victoria to be down by 12.7 per cent in this financial year and to decline by a further 33.8 per cent in the 2020/21 financial year.
The coronavirus pandemic is blamed for the slowdown, which could put half a million jobs at risk.
HIA Victoria executive director Fiona Nield said the potential low point, in December, could be worse than during the 1990s recession.
"The COVID-19 restrictions have caused a shock to the economy in recent months through lower sales and high levels of cancellations which will see a contraction of home building activity in the second half of this year," Ms Nield said in a statement.
"Stimulating demand so that the existing housing workforce can be retained and can deliver the homes Victorians need this year has never been so important."
Regional numbers for new building approvals, to the March quarter - pre-coronavirus - indicate a much stronger market than metropolitan Melbourne.
Ms Nield pointed out that Ballarat was particularly strong, up by 31 per cent since Melbourne's residential peak in December 2017.
"This region has been driven recently by areas like Alfredton and Delacombe, while 'Ballarat - North' and 'Ballarat - South', which were more significant in previous years, have declined since around 2015," she said.
"Unfortunately, given that specific outcomes for individual regions are subject to so much policy uncertainty at this time, we are not yet able to give specific forecasts for regions smaller than the states and territories. But HIA's has revised its housing forecasts in light of the COVID-19 pandemic and we expect housing starts in Victoria to be down by 12.7 per cent in this financial year and to decline by a further 33.8 per cent in the 2020-21 financial year. If this transpires, the commencement of new homes in Victoria will have fallen over 40 per cent from last year, to next."
Integra, the Ballarat developer behind the Lucas project, among several others, remains optimistic.
Its director of land development, Nick Grylewicz, said there were concerns about a "softening" of the market, but while they may be slower to act, buyers were still making inquiries and he was still confident in the Alfredton and Lucas markets.
"We are somewhat fortunate that we have mature projects with close to ten years of creating a community in Lucas. We had future sales to keep trades moving and we invested in the early provision of infrastructure, but the challenge will be coming out the other side of this," he said in a statement.
"Integra has invested a lot into the infrastructure of our projects, such as schools, shops, parks and landscaping."
He added Ballarat's big infrastructure projects, like the GovHub building and BSEC stage two, will help keep people employed during the pandemic recovery phase.
"Traditionally Ballarat is somewhat immune to the peaks and troughs of the housing industry and we don't face the same issues seen in Sydney and Melbourne," he said.
"All the key indicators for Ballarat as a region of growth are still really strong - livability, affordability and the relaxed regional lifestyle offered here."
To continue stimulating demand, this week the Property Council of Australia proposed a $50,000 stimulus payment to buyers of new homes, among other cost-saving measures like removing stamp duty - according to The Age, the council estimates this plan could support 200,000 jobs.
Mr Grylewicz said the proposal had merit, especially when considered with the state government's extension of the $20,000 First Home Buyer Grant to June 2021 and low interest rates.
"With these incentives in place it is looking like first home buyers could see reductions of up to 40 per cent on the deposit they would need to pay, this is going to be a real confidence boost for buyers," he said.
"Incentives like the 'New Home Boost' scheme proposed by the Property Council of Australia would be welcome support and would go a long way in providing a confidence boost to buyers.
"The development and construction industry is a backbone of the Australian economy providing more full time jobs than any other sector, any further government stimulus in this sector would be most welcome."
Ms Nield said HIA was working with the state government on further proposals.
"Immediate measures are required to stimulate the demand for new homes and to restore confidence among home buyers in making building or renovating investments," she said.
"Now is the time to rebuild the pipeline and that will take some time.
"HIA has been putting forward a range of measures to encourage home buyers back to the market, including a stimulus for home buyers, planning and building reforms, stamp duty concessions and incentives for foreign investors, all of which are aimed at rebuilding housing activity in Victoria."
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