It is nine months since the RBA’s last rate rise and according to HIA Chief Economist Tim Reardon market confidence is returning. Source: Timberbiz
“It is only the heavily taxed markets of NSW and Victoria that are yet to see a trough in detached home building in 2024,” he said.
HIA released its Economic and Industry Outlook report recently. The report includes updated forecasts for new home building and renovations activity nationally and for each of the eight states and territories.
“Most housing markets appear to have reached or passed the trough in home building by mid-2024, following the fastest increase in the cash rate in a generation,” Mr Reardon said.
“States with good employment opportunities and relatively more affordable land are leading the charge.”
Mr Reardon said that Western Australia, Queensland and South Australia appeared to be past the trough in their cycles.
The number of contracts being signed for the construction of new homes has been increasing, at least since the start of the year, seeing a new wave of projects commencing construction.
“This improvement in home building activity is not evident in New South Wales and Victoria where new tax imposts continue to impair home building,” he said.
“Government policies continue to inflate the costs of land and construction in New South Wales and Victoria. Policy changes are also adding to market uncertainty delaying a return of investment into new home building and exacerbating the shortage of housing.
“Australia’s economic fundamentals have remained resilient to the rise in interest rates. Unemployment remains exceptionally low, the economy stable and population growth strong,” he said.
“Against a backdrop of an acute shortage of housing, households are slowly returning to the new home market.
“Australia could be seeing far greater home building volumes, if policymakers would reduce the costs of land and construction that they are responsible for inflating.”
Mr Reardon said that productivity in the sector was improving rapidly as the adverse impact of border closures and policy disruptions were replaced with more stable conditions.
“Material price rises are back to pre-pandemic levels and labour shortages have eased to some extent,” he said.
“Labour shortages are easing as activity levels decline.
“These factors are setting the scene for an increase in home building later this year as confidence is restored.
“This increase in new home commencements could be accelerated if governments remove the market failures, tax imposts and constraints on the industry, or at least stop increasing housing taxes,” h said.
Detached houses: There were 25,890 detached houses that commenced construction across Australia in the first quarter of 2024, up by 5.8 per cent on the previous quarter. This figure is forecast to moderate down by 1.6 per cent in the June Quarter 2024 to 25,470, producing a financial year total of 99,060 commencements in 2023/24, down by 10.1 per cent on the previous year. A modest improvement is forecast thereafter, up by just 0.8 per cent to 99,890 in 2024/25. This would mark the conclusion of the two weakest years for detached commencements since 2012/13, over a decade earlier. Activity is expected to accelerate from here, exceeding 115,000 by 2026/27.
Multi-units: recorded 14,240 commencements in the March Quarter 2024, down by 6.2 per cent from the previous quarter and the second weakest quarter for the sector in over a decade. The June Quarter 2024 is forecast to see a bounce back of 15.4 per cent to 16,440, producing a financial year total of just 60,970. This would be down by 4.0 per cent on the previous year. A modest improvement is expected in 2024/25, up by 13.0 per cent to 68,880, which would conclude the weakest three years for the sector since 2011/12, over a decade earlier. Multi-unit commencements are forecast to accelerate thereafter, reaching a peak of 104,240 in 2027/28.
