Australia is set to commence construction on little more than a million new homes over the next five years, almost 200,000 short of the Australian government’s target. Source: Timberbiz
“It is possible to build 1.2 million new homes over five years, but it will require significant policy reforms. These reforms need to include lowering taxes on home building, easing pressures on construction costs, and decreasing land costs,” HIA Senior Economist Tom Devitt said.
“As it stands, both the detached housing and multi-units markets are set to be recovering in 2024/25 from recent decade lows,” he said.
Mr Devitt said that a cut to the cash rate this year was increasingly uncertain as unemployment remained low and inflation “increasingly sticky”.
“The recovery in home building isn’t, however, reliant on a cut to the cash rate, but a more stable interest rate outlook. Pent up demand for housing will allow market confidence to grow and buyers to return to the market,” he said.
“This recovery will, nonetheless, be insufficient to meet government housing targets as long as home building continues to be constrained by punitive taxes and regulations.”
Punitive tax surcharges on foreign investors were squeezing out precisely the investment needed to help meet government housing targets and at the same time recent changes to building codes were likely to add tens of thousands of dollars to the cost of building new homes.
“More effort is also needed to increase the capacity of the industry. Access to skilled labour from overseas will remain crucial, as will the need to train and upskill our existing workforce. More support for apprenticeships, including maintaining current apprenticeship subsidies, will go a long way in this direction,” Mr Devitt said.
“Reforms in these areas would represent a material upside risk to this housing outlook and could see Australia exceed the government’s target and potentially build sufficient homes to meet demand.”
Detached house commencements: An annual total of 96,250 detached house commencements in expected for 2023/24, down by 12.6% on the previous year and down by almost a third on the 2020/21 peak. This will mark the trough of the cycle and the weakest financial year since 2012/13, over a decade earlier. Commencements are expected to remain weak at 97,800 in 2024/25, just a 1.6% improvement, before recovering and exceeding 110,000 by 2026/27.
Multi-unit commencements: Multi-unit commencements are expected to total 72,010 in 2023/24, up by 14.1% on the 63,100 trough and 11-year low in 2022/23. The recovery in multi-unit commencements is expected to continue, up by 23.1% to 88,610 in 2024/25 and reaching almost 100,000 by 2026/27 before moderating back to 96,230 by 2027/28.
