New home construction in Australia’s most southern state remains positive despite experiencing its two slowest years since 2016, according to recently released data.
The forecast for future new homes in Tasmania remains brighter than many of its mainland counterparts, regardless of the significant slowdown.
But, experts say the fact the comparatively small island remains ahead of its continental competition is a good sign the region’s new home industry will bounce back sooner rather than later.
Housing Industry Association Executive Director Stuart Collins said that notwithstanding the reduction in new home construction in Tassie, the state was poised for a more positive outlook in the foreseeable future.
“The outlook for new home building in Tasmania is brighter than for the larger mainland states to the north,” Mr Collins said.
“Tasmania commenced construction on 2,220 detached houses in 2023/24, with a modest 1.2 per cent improvement expected in 2024/25, to 2,240.”
“While these would represent the two weakest years for the state since 2016/17, it is a less severe trough than the decade lows being experienced in Victoria and New South Wales.”
Data trends build a positive outlook for new homes
The optimistic data comes from the HIA’s recently released Economic and Industry Outlook report, which contains up-to-date forecasts for new home building and renovation activity nationally and in the eight states and territories.
Mr Collins says a combination of factors would likely push demand for new Tasmanian homes in the foreseeable future, offering security to the state’s home construction companies.
“Tasmania has been receiving record numbers of overseas arrivals, as well as a significant number from the interstate exodus from Melbourne and Sydney during the pandemic,” he explained.
“Extremely low rental vacancy rates across much of the state will sustain underlying demand for new home building, even as population growth moderates.
“Tight rental markets and the rapid deterioration in housing affordability during the pandemic means there is still a lot of work ahead for policymakers.”
“Land shortages in Tasmania have seen residential lot prices surge since the pandemic began, with prices up by around 70 per cent in Hobart and double across the regions.”
Policy changes key to boost new build numbers
Tasmania commenced construction on 480 detached houses in the first quarter of 2024, down by 10.7 per cent in the last quarter of 2023. Despite a 16 per cent bounce back in the June quarter, the total number of new builds for the 2023/2024 financial year was down nearly 20 per cent from the year prior.
However, HIA experts say a lack of available land and unnecessary red tape surrounding building approvals had played a significant role in the reduction, with simple policy changes likely to result in significant upside potential for both detached home building and new medium-density housing.
There is significant upside potential to the outlook for detached home building if land is fast-tracked and made shovel-ready more rapidly in the coming years.
“The removal of policy constraints is critical to supporting this sector. This means abolishing the punitive taxes imposed on the very investors that are so crucial to build higher-density city housing. These taxes perversely cost tax revenue in terms of lost construction activity, productivity and economic growth,” Mr Collins said.
“There is a clear policy desire for more medium-density development, especially in Hobart. The risk is that difficult design guidelines and continued scope for local objections to density may remain as obstacles for the sector.”
“The Australian government must streamline visas for in-demand trades so projects can be completed on time and on budget, otherwise, projects – especially the larger ones – will struggle to even commence.”
“As the situation currently stands, underlying demand would support much greater home building volume if policy were to permit it.”
Those changes are something the state government is already actively working towards, with Tasmania State Premier Jeremy Rockliff telling Build-it that policymakers would up the pace of home construction by reducing red tape and relying on new time-saving technology.
“Planning is the key to getting the housing stock we need to deliver,” he said at the HIA Future Homes Forum on Friday.
“It’s all about making it easier to get planning and building approvals to ensure construction starts faster.”
