Experts say Aussie industry is on track to massively fall behind the government’s promise to build 1.2 million homes over the next five years.
According to the Housing Industry Association’s (HIA) recent economic and industry Outlook report, rising inflation rates, soaring project costs and decade-low construction activity have left builders struggling to complete a backlog of residential projects nationwide.
The research showed 96,250 detached homes were expected to be built in 2023/24, down 12.6 per cent on the previous year and down by almost a third on the 2020/21 peak.
According to Senior Economist Tom Devitt, this slump would mark the weakest financial year for the industry since 2012/13, over a decade earlier.
Commencements are also expected to remain weak at 97,800 in 2024/25, just a 1.6 per cent improvement, before recovering and exceeding 110,000 by 2026/27.
It’s a slightly better story for multi-unit builds, with 72,010 expected to start in 2023/24, up by 14.1 per cent on the 63,100 11-year low in 2022/23.
The recovery in multi-unit commencements is expected to continue, up by 23.1 per cent to 88,610 in 2024/25 and reaching almost 100,000 by 2026/27 before moderating back to 96,230 by 2027/28.
Something has to change
Despite the forecasts predicting an eventual recovery in the years to come, Mr Devitt warned that it would be too little, too late to fulfil the government’s order for 1.2 million homes in 2029.
“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,” he said.
While the stubbornly high inflation rate and interest hikes have a part to play in boosting home builds across the country, Mr Devitt said it was up to the federal government to enact policy reforms and tax changes if they wanted to see the target hit.
“A cut to the cash rate this year is increasingly uncertain as unemployment remains 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.
“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 are squeezing out precisely the investment needed to help meet government housing targets.
“At the same time, recent changes to building codes are likely to add tens of thousands of dollars to the cost of building new homes.”
The HIA also said that the industry needed to put “more effort” into increasing the capacity of the residential sector, pushing for a focus on overseas skilled labour and the need to upskill the existing tradie workforce.
“More support for apprenticeships, including maintaining current apprenticeship subsidies, will go a long way in this direction,” they wrote in a statement.
“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.”
