The latest ABS Building Activity data released today shows that 2014 was a bumper year for new residential construction with the value of work and number of building starts both recording double digit increases in the year to December, seasonally adjusted.

New residential dwelling commencements jumped 17.9 per cent year on year hitting 197,972 in seasonally adjusted terms for 2014, despite commencements for the quarter falling by 10.6 per cent.

The value of new residential building work increased by 2.8 per cent for the December quarter and experienced an 11.6 per cent increase for 2014 over the previous year in seasonally adjusted terms.

The Property Council of Australia’s Executive Director Residential Nick Proud said the good results for new residential building activity would provide dividends in terms of housing affordability.

“We are seeing strong increases in the value of new residential construction work nationally, which combined with an increase in new commencements to record high levels just shy of the 200,000 mark for the year, is great news for homebuyers,” Mr Proud said.

“The more new homes we get onto the market, the more the pressure will come off house prices.

“However the 10.6 per cent drop in new residential home starts in the December 2014 quarter sounds a note of caution and is something that should be closely monitored in 2015.

“What is encouraging in this latest full year data is that construction activity is now catching up with building approvals. This translates into more jobs being created and higher levels of economic activity.

“Over the 12 months to December 2014 construction started on 45,000 new homes on top of the 153,000 homes that have been built on average over each and every year of the preceding decade.

“This significantly increased number of new homes being built is finally creating adequate supply to start meeting the demand from household formation rates which are sitting at around 164,000 homes per annum.

“There is a decade of pent up demand that the current uplift in activity will go some way to satisfying. Research commissioned by the Property Council earlier this year revealed that Sydney alone is on track to fall 190,000 homes short in the next ten years.

“The key going forward is to have this increase in new supply spread further and more evenly across the states and territories, and maintain sufficiently high levels for the next several years.

“This will only be achieved if governments at all levels commit to implementing micro-economic reform, particularly in the areas of tax and planning, to unlock the growth potential of the property and construction industries.”