Home building increasing everywhere but Sydney
A national new home building recovery is in sight, but state government housing policies risk stalling the recovery.
That's the view from HIA Senior Economist, Matt King, after the HIA released its Economic and Industry Outlook report.
The report includes updated forecasts for new home building and renovation activity nationally and for each of the eight states and territories.
“At the national level, demand for new homes is accelerating and this is largely due to the fact that the RBA hasn’t increased interest rates for a year, population growth is still elevated, the unemployment rate remains low and real incomes have stabilised,” King said.
“While activity is picking up, the varied nature of activity levels across capital city and regional markets continues to be pronounced.
“We have confidence that new home-building activity across most markets will continue to improve as we transition into the new year."
King said however that Sydney remains an outlier, and there is still no indication of a near-term rebound in both detached houses and multi-residential buildings.
“New home building in the Sydney basin remains exceptionally low, primarily due to exceptionally high land prices and an ongoing excessive impost of housing taxes and infrastructure charges."
Perth, Adelaide, and South East Queensland continues to lead the way in new contract sales and building approvals, despite ongoing supply-side constraints.
In the September quarter of 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.
The calendar year 2024 has produced a growing divergence of both geography and typology.
The detached home building sector looks promising, evidenced most recently by detached house approvals across Australia rising by 6.1 per cent in the month of September to 9,890. This was the highest monthly number of detached house approvals in two years.
King said in contrast, the apartment sector "remains constrained", and is unlikely to experience any material recovery before mid-2025.
"The sector continues to be dampened by skilled labour shortages, business credit constraints and the aftermath of significant building material cost escalation.
“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.
“With relatively stable economic conditions nationally, home prices will remain elevated, rental vacancies will remain acutely low and demand for new homes will recover."
King says the extent of the recovery in new home building will be determined by the ability of governments to ease the barriers to home building.
“Housing investment is encouraged by the 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.
“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,” King stated.
There were 14,090 multi-unit commencements in the June quarter of 2024, which is 7.8 per cent lower compared to the previous quarter and the second weakest quarter in 12 years. This is expected to increase by 15.5 per cent in the September quarter to 16,260, followed by a modest 1.8 per cent increase in the December quarter.
The upswing will bring multi-unit starts in the calendar year 2024 to 62,190, the weakest year since 2011 (62,170). Multi-unit commencements are expected to rise by 11.5 per cent in 2025 to 69,360 and by a stronger 20.9 per cent in 2026 to 83,870, followed by a 20.3 per cent increase in 2027 to 100,860 and a 2028 peak of 104,380.
