Prolonged debate over negative gearing threatens to derail confidence towards Australia's property market, the Housing Industry Association says.
New home sales have kicked off 2016 in strong form with residential construction expected to have another healthy year ahead.
But HIA chief economist Harley Dale warns that residential construction won't reach the lofty heights of last year.
"The new home building sector is crucial to Australia's economic prospects in 2016 and should continue as a mainstay of domestic economic activity," he said.
But continued uncertainty over policy action for negative gearing and capital gains tax is a major worry for the industry, he said.
"The longer that debate goes on, the greater the risk that confidence deteriorates," he said.
Mr Dale said tinkering with negative gearing won't provide a magic wand that solves all of Australia's housing affordability problems.
"We think that debate is simplistic, and now is the absolute worst time to be risking creating any uncertainty," he said.
Mr Dale said that after three or four very strong years, residential construction activity peaked last year.
But HIA forecasts dwelling starts volumes to hold up at historically high levels in 2016.
"While we had a peak last year, we won't have a sharp downturn over the short term," he said.
"Our concern is around 2017 and 2018, where we see quite a considerable moderation in activity."
Mr Dale said there's a risk of a sharper contraction in new home building once the current record pipeline is exhausted.
Housing Industry Association data shows new home sales jumped 3.1 per cent in January, marking a second month of gains.
Detached house sales surged 5.8 per cent, while those of multi-units dropped by the same amount.
Detached house sales rose in each of the five mainland states in the month, led by Queensland and NSW.
Share
