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HIA released its Economic and Industry Outlook report recently. The report includes updated forecasts for new home building and renovations activity nationally and for each of the eight states and territories.
“Most housing markets appear to have reached or passed the trough in home building by mid-2024, following the fastest increase in the cash rate in a generation,” added Mr Reardon.
“States with good employment opportunities and relatively more affordable land are leading the charge.
“Western Australia, Queensland and South Australia appear to be past the trough in their cycles. The number of contracts being signed for the construction of new homes has been increasing, at least since the start of the year, seeing a new wave of projects commencing construction.
“This improvement in home building activity is not evident in New South Wales and Victoria where new tax imposts continue to impair home building.
“Government policies continue to inflate the costs of land and construction in New South Wales and Victoria. Policy changes are also adding to market uncertainty delaying a return of investment into new home building and exacerbating the shortage of housing.
“Australia’s economic fundamentals have remained resilient to the rise in interest rates. Unemployment remains exceptionally low, the economy stable and population growth strong.
“Against a backdrop of an acute shortage of housing, households are slowly returning to the new home market.
“Australia could be seeing far greater home building volumes, if policymakers would reduce the costs of land and construction that they are responsible for inflating.
“Productivity in the sector is improving rapidly as the adverse impact of border closures and policy disruptions are replaced with more stable conditions.
“Material price rises are back to pre-pandemic levels and labour shortages have eased to some extent.
“Labour shortages are easing as activity levels decline.
“These factors are setting the scene for an increase in home building later this year as confidence is restored.
“This increase in new home commencements could be accelerated if governments remove the market failures, tax imposts and constraints on the industry, or at least stop increasing housing taxes,” concluded Mr Reardon.
Detached houses: There were 25,890 detached houses that commenced construction across Australia in the first quarter of 2024, up by 5.8 per cent on the previous quarter. This figure is forecast to moderate down by 1.6 per cent in the June Quarter 2024 to 25,470, producing a financial year total of 99,060 commencements in 2023/24, down by 10.1 per cent on the previous year. A modest improvement is forecast thereafter, up by just 0.8 per cent to 99,890 in 2024/25. This would mark the conclusion of the two weakest years for detached commencements since 2012/13, over a decade earlier. Activity is expected to accelerate from here, exceeding 115,000 by 2026/27.
Multi-units: recorded 14,240 commencements in the March Quarter 2024, down by 6.2 per cent from the previous quarter and the second weakest quarter for the sector in over a decade. The June Quarter 2024 is forecast to see a bounce back of 15.4 per cent to 16,440, producing a financial year total of just 60,970. This would be down by 4.0 per cent on the previous year. A modest improvement is expected in 2024/25, up by 13.0 per cent to 68,880, which would conclude the weakest three years for the sector since 2011/12, over a decade earlier. Multi-unit commencements are forecast to accelerate thereafter, reaching a peak of 104,240 in 2027/28.
“The HIA Trades Availability Index recorded -0.47 in the December Quarter 2024, representing only a modest improvement in the availability of skilled trades in the second half of last year,” stated HIA Senior Economist Tom Devitt.
“Long-standing constraints on new home building in NSW, particularly land supply and planning system inefficiencies, are locking more and more first home buyers out of home ownership,” stated HIA Executive Director, NSW, Brad Armitage.
HIA has welcomed the Tasmanian Government’s announcement of a Density Incentive Grant Scheme for medium and high-density housing developments.
“Restrictions on lending have been progressively tightened over the past 15 years making it increasingly difficult for banks to lend to first home buyers. Despite this increase in lending restrictions and the cost of lending, mortgage delinquency in Australia remains exceptionally close to zero,” stated HIA Economist, Maurice Tapang.