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“Rising interest rates can cause building commencements to slow within six months, but in this cycle, the lag will be significantly longer,” stated HIA Regional Executive Director, Fiona Nield.
HIA released its economic and industry Outlook Report for Australia today. The Outlook Report includes updated forecasts for new home building and renovations activity nationally and for each of the eight states and territories.
“There were almost 50 per cent more detached homes under construction in Victoria at the end of 2021 than pre-COVID. There are also more homes approved and waiting commencement than in almost 20 years,” added Ms Nield.
“With this elevated volume of homes in the pipeline, the number of homes under construction will remain at this high level next year and potentially into 2024.
“This strong ongoing demand has occurred at the same time as significant constraints on materials, land and labour, leading to rapid increases in the cost of construction. This is putting enormous pressure on Victorian builders.
“The boom in demand for new homes is being experienced in all states and territories and can also be observed across many countries as households seek additional space, given all the extra time they have spent at home. Consequently, global demands have seen prices for some key building materials rise significantly.
“The ABS estimates that the cost of home building materials, not including the cost of labour, increased by 15.4 per cent in the year to March 2022. On the ground, the increases are higher still. This is the fastest annual increase in the official estimate of home building materials since 1980 and they are still rising.
“The United States has seen an almost identical cost increase with material costs for residential construction estimated to have increased by 21.2 per cent over the year to April 2022 compared to the previous year.
“An acute rental shortage has also seen strengthening demand for multi-units. A further deterioration in affordability will see demand continue to shift in favour of multi-units and there are also early signs that migration is returning. These factors will more than offset the adverse impact of rising interest rates on this sector of the housing market.
“With detached home building in Victoria remaining at capacity potentially into 2024 and the volume of multi-unit commencements increasing, the shortage of building materials, land and labour will continue to be the main pinch point for the industry,” concluded Ms Nield.
Last week Craig Smythe from of Adbuild Constructions received HIA Life Membership in recognition of his service to the residential construction industry over the last 35 plus years. He becomes only the third Hunter member to receive this prestigious award.
“The long-discussed move of the University of Tasmania (UTAS) from the Sandy Bay campus presents a real opportunity to ease housing pressures in Greater Hobart,” said Stuart Collins, HIA Executive Director Tasmania.
The Victorian Government has announced it is proposing Regulations that will require building practitioners and plumbers to meet Continuing Professional Development (CPD) requirements. A Regulatory Impact Statement and proposed regulations has been released for public comment.
HIA commented on the Explanation of Intended Effect (EIE) which outlines proposed changes to encourage more low-rise and mid-rise housing (December 2023).