As demand continues to grow and building activity picks up, experts are hopeful that residential construction can get back on its feet – if state policies get on board.
The recent Economic and Industry Outlook report by the Housing Industry Association (HIA) says the signs are promising for the nation’s home construction sector, as activity for builders and renovation projects continues to improve following the year-long pause in the RBA’s rate rises.
Despite ongoing material supply constraints and tradie shortages, HIA Senior Economist Matt King said that the detached home building sector was finally starting to look promising after September’s 6.1 per cent approval figures proved to be the highest monthly number seen in two years.
“It is anticipated that detached house starts will rise steadily from a trough of 100,230 in 2023 to 115,690 in 2027. If the supply of land and labour are addressed, there is significant upside potential for this forecast,” he said.
Unsurprisingly leading the charge were Perth, Adelaide and South-East Queensland as rapid regional growth continued to fuel new contract sales and building approvals.
“In the September quarter 2024, building approvals increased from the corresponding quarter last year in Western Australia (+60.1 per cent), Queensland (+24.2 per cent) and South Australia (+16.3 per cent) in seasonally adjusted terms,” added King.
“Calendar year 2024 has produced a growing divergence of both geography and typology.
“With relatively stable economic conditions nationally, home prices will remain elevated, rental vacancies will remain acutely low and demand for new homes will recover.”
Basically, King is hopeful that the best realistically possible outcome for the sector, which sees owners’ property investment’s hold value and rental affordability improve, is actually achievable despite the market pressures still placed on builders.
But it is still a long shot. Cities like Sydney, where property prices have more than doubled in recent years, remain firmly behind in building activity, with King warning that there was no indication of “a near-term rebound” for both detached and apartment builds.
The outlook on apartment buildings in general didn’t fair much better when compared to homes, as continued cost hikes and business credit constraints have experts predicting a continued decline in activity until at least mid-2025.
State policies are the key
Still, momentum is undoubtedly building in the home construction sector, and according to King, it’s now up to state governments to bring in policies that propel the industry forward or risk it falling behind again.
“Housing investment is encouraged by certainty of policy settings. Recent state government announcements to levy increased surcharges on foreign investors and introduce taxes on short-term rental accommodation are unhelpful at a time when stability is needed to achieve the 1.2 million home target.
“Failure to implement policies such as expedited land release, concessions on property taxation, and accelerated development approval timeframes; risk slowing the rate of home building over the next five years.”
If Sydney was ever to climb out of its construction hole, King said the city would also need to rethink the “exceptionally high land prices and an ongoing excessive impost of housing taxes and infrastructure charges,” in the area.
“At the beginning of this upswing in the cycle and the initial stage of the National Housing Accord target period, now is the time to ensure that each state government housing policy mix is entirely pro-supply,” he added.
