HIA released its economic and industry Outlook report today. The report includes updated forecasts for new home building and renovations activity nationally and for each of the eight states and territories.

“The number of new homes commencing construction peaked in June 2021 and is set to continue to decline for another year under the weight of rising interest rates and land costs,” added Mr Reardon.

Talking ahead of the National Cabinet meeting, Mr Reardon said: “There are three things required from governments to address this shortage. 

“Firstly, to increase the supply of land for both detached and apartment construction. The volume of land transactions has fallen to around one third of pre-pandemic levels and the price has increased by more than 200 per cent over the decade. 

“Secondly, governments need to lower the tax and regulatory imposts on home building. Even in the face of an acute shortage of housing stock, there are a range of additional regulatory imposts to be imposed this year that will add around $25,000 to the cost of a new house or apartment.

“Finally, this is the right time in the cycle for governments to invest in public housing stock because they will get a better return on their investment, and they will support capacity within the industry during a trough of activity. The importance of maintaining capacity within domestic manufacturing and among the trades base was never more evident than during the pandemic.

“The passage of the Government’s Housing Australia’s Future Fund is an important step as state governments continue to under-estimate population growth, and the demand for housing that will flow.

“Recent projections of demand for housing among state governments have failed to appreciate the growth in population or the number of homes required for each new resident. 

“Despite this need to increase housing stock, the number of new homes commencing construction is set to stagnate as the volume of detached homes commencing construction slows over the next year. Multi-unit commencements, however, are expected to increase from the decade low volume of new starts that was observed in 2022. 

“Even a decision to cut the cash rate today would not produce a recovery in house commencements until the second half of 2024.

“Exceptionally low rental vacancies, strong migration and low unemployment rates will ensure a return of investment into the construction of new houses and multi-units when the RBA stops its rate rising cycle and avoid a deeper downturn in the national economy,” concluded Mr Reardon.

Detached houses: Slowing from a peak of 149,300 detached starts in 2021, new starts are expected to fall to just 95,370 detached houses in 2024, the lowest number since 2012. From a trough in mid-2024, detached starts are expected to growth modestly off the back of a solid economy and population growth to 110,820 by 2027.

Multi-units: There were just 63,510 multi-unit commencements in 2022, a decade low, and only a small 9.7 per cent improvement to 69,680 is expected in 2023. Stronger improvements of 19.8 per cent, 11.6 per cent and 0.9 per cent are expected to bring the annual total back to a peak of 94,030 by 2026, before a moderation of 2.8 per cent back down to 91,360 in 2027.

HIA Forecast - Australia

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