policy

Building wins

The HomeBuilder grant was a big win for the residential building industry and will make a vital difference to activity in the next six months, but the outlook for home building in 2021 is still uncertain.

Author

Graham Wolfe

‘Half a million jobs at risk’: this was HIA’s shout to media on 20 May 2020, generating political and public debate about COVID- 19’s impact on home building, and the importance of the industry to Australia’s economic stability. By 4 June, on a cold Canberra morning, HIA stood with the Prime Minister, Treasurer and the Housing Minister to announce a stimulus package for residential building.

Housing before COVID

In February, HIA’s housing forecasts predicted a positive end to FY 2019/2020 and foreshadowed a comeback in FY 2020/21 for those states whose activity had slowed in the past few years, such as Western Australia and Queensland. Overall, HIA predicted approximately 171,000 new homes would be delivered in 2020/2021, bringing the national figure back to the long-term average for new home building activity.


While the new homes forecast represented strong activity, this number would be well below the record levels reached over the previous five years, which peaked at 234,000 new homes in 2016.


Understanding the makeup of the housing supply also pointed to an important difference for the year ahead.


In 2015/16 the industry delivered around 116,000 detached homes and 118,000 multi-unit dwellings – the first time that more multi-unit dwellings had been built compared to detached homes. In stark contrast, in 2019/20 (before COVID-19) forecast figures predicted this would drop to around 98,000 detached homes and just under 62,000 multi-unit dwellings.


Against this backdrop, the residential building industry was already feeling the pain of scaling back as 2020 started. COVID-19 brought a new dynamic into the equation.

Jobs at risk

Until recently, HIA, along with governments and other industry groups, cited that more than one million people are employed in the building and construction industry, a figure based on Australian Bureau of Statistics (ABS) information. In May, HIA completed research to identify the real figure for the residential building industry, separate from other construction sectors. The results painted an important picture as the pandemic took hold of economic activity.


In short, the ABS figures that are commonly used include those who are employed onsite in construction, including residential, commercial and civil work. Given the residential building industry’s size and the potential economic activity linked to it, understanding the real nature and scale of the workforce was key information for HIA to access.


Using multi-sourced data, the Association’s analysts determined there are in fact more than one million people engaged in the residential building industry alone. Of this, more than 700,000 are employed in construction roles, while nearly 300,000 are employed in non-construction roles.
These numbers do not include the additional employment generated by the complementary sectors that provide the building supplies and retail services used in every new home.


Establishing these figures provided critical details for HIA to highlight to federal and state governments the impact COVID-19 could have on the residential building industry, jobs and the urgent need for stimulus.

The call for stimulus

In May, HIA’s housing forecasts were revised to account for the slowdown in consumer activity due to COVID-19. The revision reflected a potential reduction in the pipeline flowing into a physical slowdown of new projects commencing from July to December 2020 (depending on the state).


A staggering reduction in activity was revealed, which would see around 112,000 new homes built in 2020/21, as opposed to the 171,000 originally forecast.
These figures reflected information, again using multi-sourced data including the HIA new home sale survey, which showed a marked fall in activity in March, dropping to the lowest levels on record. Sales fell further in April and again in May.


Cancellation rates also reached new levels, with reports of up to 26 per cent of existing projects being stalled or cancelled due to COVID-19.


HIA’s position was clear: a reduction in activity was not sustainable for industry and would have consequences for the Australian economy that would reverberate along the supply chain for the foreseeable future.


HIA’s Home Building Recovery Plan set out actions for the federal, and state and territory governments, to take up together to stabilise housing activity. The plan’s centrepiece was a call for an incentive for new home building and renovation work, up to the value of $50,000. It was the focus of HIA’s engagement with governments from April onwards.


HIA flagged that urgent action was needed to stem negative consumer sentiment and to limit the reduction in workforce numbers associated with the slowdown in new home sales in the second half of 2020.

HomeBuilder grant

Within two weeks of HIA’s public call to action, which was supported by clear evidence of the predicted slowdown in activity, the HomeBuilder grant was announced.


Clearly, the HomeBuilder grant is not intended to address all of the concerns home builders have been facing since COVID-19 struck, but it will provide an important boost to consumer sentiment, consumer activity and hence to home builders, for both new homes and renovation work.


In the Prime Minister’s words, it’s about jobs, jobs and jobs.

It’s about creating activity for the remainder of 2020 and locking in a level of forward activity into 2021.

From all reports, so far the outcome for consumer sentiment and activity has been very positive.


There were however some early details about the grant that were concerning, and HIA took on board feedback from members to seek changes that would improve the ability of homeowners to access the scheme.


Some of these changes were provided in mid-June. Applicants will be able to request an extension of time to the three-month commencement requirement, sales (conveyancing) contracts are eligible in the same way as a building contract, and the payments will be managed in a similar way to the current First Home Owner’s grant.


These and other details are still being confirmed through the state and territory revenue offices.
While not all home buyers nor all home building projects will be eligible for the grant, the near $700million funding program provides a strong injection of consumer incentive.


HomeBuilder will make a vital difference to activity in the next six months, but the prospect for home building in 2021 is still very unclear.
HIA will continue to monitor activity and highlight with all governments the importance of home building to Australia’s economic prosperity. Our industry is too big to ignore and too important to let down.
policy

HomeBuilder facts

HomeBuilder is a time-limited, tax-free $25,000 grant for owner occupiers who build new homes or carry out substantial renovations projects. It is available for building contracts signed between 4 June and 31 December 2020, including sales contracts for new builds where building commences after 4 June 2020.
An existing home that has already been completed, or started construction before 4 June will not qualify for HomeBuilder.

 

Eligible homeowners
  • A natural person (not a company or trust) over 18 years
  • An Australian citizen
  • Meet the income caps: $125,000 per annum for an individual and $200,000 per annum for a couple.

Eligible projects
  • Build a new home as a principal place of residence on new land, where the property value (house and land) does not exceed $750,000
  • Build a new home as a knockdown rebuild renovation project, where the value of the existing property (house and land) does not exceed $1.5 million pre-renovation 
  • Purchase a yet-to-be commenced new home ‘off the plan’ that does not exceed $750,000
  • Substantially renovate an existing home as a principal place of residence, at a value between $150,000 and $750,000, where the existing property value (house and land) is less than $1.5 million pre-renovation.

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