Noel Towell May 22, 2012
Construction slows at Kingston due to the rain. File photo. Photo: Gary Schafer
Canberra's building boom has outstripped population growth, leading to an emerging housing oversupply, according to a leading economic forecaster.
And BIS Shrapnel, in its annual snapshot of business and population in Australia, says that the end of the good years in the capital's construction trade will combine with Australian Public Service cuts to slow the territory's above-average population growth.
The economic forecaster predicts Canberra is in for a period of falling house prices, decreased household spending, and fewer job vacancies.
The BIS Shrapnel report, produced with accountants PKF, says the ACT's population has been growing steadily by about 2 per cent annually, well above the national rate of 1.4 per cent, but that the squeeze on the local economy was predicted to deter the ''interstate migrants'' that have been underpinning the growth.
''A construction boom has driven the [ACT] economy over the past two years, with strong increases in dwelling building and public investment being joined in 2010-11 by surging private sector engineering construction, driven by Cotter Dam, Googong Dam pipeline works, as well as roads related construction,'' the report said. ''This boom and strong growth in public sector employment underpinned solid increases in employment growth in 2010, which in turn fuelled solid growth in household spending in 2011.''
But the authors say that the boom years are coming to an end, warning an oversupply in the residential sector combined with the continuing troubles of the city's office market will hit the building sector hard.
''Construction is now set to turn down, with activity in all construction segments forecast to decline over the next few years.
''Recent strength in dwelling building has run ahead of population growth, such that an oversupply is starting to emerge.''
The end of a round of big infrastructure spending was also expected to hurt.
The report predicted significant knock-on effects of cuts to federal government spending.
''Adding to the expected weakening will be Commonwealth budget cutbacks, which will impact on public sector employment and other industry sectors dependent on outsourced government activity … This in turn will weigh on household spending over the next year.''
The slowing of the territory's economy looked likely to see a decline in the previously high levels of population growth in the coming years, according to the BIS analysts.
''The [ACT] has maintained annual population growth just below 2 per cent for the past five years.
''With the government looking to reduce spending so as to return to fiscal surplus, growth in public sector employment is likely to slow, which will weigh on population growth in the [ACT].''