Sixty kilometers south-west of Sydney's central business district, one of the largest new housing developments in Australia is emerging on the site of an old racetrack.
Oran Park Town, a joint venture between the state government and Tony Perich, one of the country's richest farmers, will be home to 30,000 people once complete in 2025. And so far its mix of affordable three and four-bedroom homes and facilities close to industrial centers is proving popular with young families.
"Demand is very strong," says Andrew Guesdon, sales manager for Wisdom Homes, which has built 150 properties at Oran Park Town. "The developers are selling land which is not due for registration for six to nine months."
The fate of Oran Park is not just being watched closely by its developers. An increase in construction activity will be crucial to efforts of policymakers hoping to engineer a rebalancing of the Australian economy over the next year.
The Reserve Bank of Australia hopes the industry, which employs about 9 percent of the country's workforce of 11.5 million, can pick up the slack and maintain growth as Australia's unprecedented resource investment boom peaks at around 8 percent of GDP later this year.
After keeping its key interest rate unchanged at 3 percent last week, the RBA said there were early indications of a pick-up in housing activity as a result of "substantial easing" of monetary policy. The argument was given some support by the latest house price index from the Australian Bureau of Statistics, that showed a far stronger than expected 1.6 percent increase in house prices in the December quarter.
But in spite of record low interest rates and improved housing affordability many forecasters are worried construction will not be able to fill the gap and that Australia will struggle to meet the RBA's forecast for 2-3 percent GDP growth this year. They believe the central bank will be forced to cut rates again to stimulate demand.
"Residential construction has the potential to plug a considerable portion of the gap. But the question is, will that potential turn into reality?" says Harley Dale, chief economist at the Housing Industry Association, Australia's largest residential building organisation.
"Based on the current evidence, the rate of recovery [in the housing market] doesn't look like being of a significant magnitude."
Interest rates have fallen in the last few months to a post-financial crisis low of three percent, but even so construction has remained weak. Building approvals in December fell by a greater than expected 4.4 percent, while figures published on Monday showed mortgage approvals had fallen for a third consecutive month in December, with the proportion of loans going to first-time buyers falling to an eight-and-a-half year low.