Slow pace of construction threatens housing target
Fresh housing construction data released by the Australian Bureau of Statistics (ABS) this week showed a lift in new home commencements, though the data reveals we’re still falling well short of the federal government’s target to build 1.2 million new well?located homes over five years from mid?2024.?
Three months into the National Housing Accord, the data show the number of dwellings that commenced construction in Q3 2024 rose 4.6% quarter-on-quarter to 43,247 in seasonally adjusted terms. However, that’s well below the required 60,000 quarterly rate to hit target.??
Over the year to September 2024, the number of new homes commencing construction reached 165,048, which was short of the 200,000 per annum needed to hit the Housing Accord target of 1.2 million homes and help ease the housing shortage.??
If building activity continues at this pace, we’ll commence construction on just over 825,000 new homes over the next five years – about a 375,000 or 30% deficit on the number of new homes required. To hit the target of building 1.2 million homes in the five years from mid-2024, commencements need to lift by 75,000 homes per year from the current run rate. This represents a 45.5% increase in building activity from the current annual rate of commencements.?
Achieving this significant uplift is unlikely whilst the residential construction industry remains challenged by capacity constraints and higher costs, keeping the spotlight on policymakers given the need to enhance the building industry's capability to provide these homes.??
If left unaddressed, the resultant shortage in new housing will only exacerbate the pre-existing housing shortage which has presented challenging affordability conditions across the country.?
The strongest growth in commencement was in detached housing starts which have surged 20.5% compared to the September quarter of 2023, and are up 5.3% since the June 2024 quarter.?
But it’s a recovery in the supply of high-density homes that’s likely to drive meaningful progress in the delivery of more new housing.??
The challenges hindering the delivery of new housing are particularly acute when it comes to higher-density developments.?
Higher labour, materials, holding and financing costs compress margins and affect the feasibility of development. This has been a particular challenge for the viability of higher density development.?
Although supply chains disruptions have now moderated since the pandemic, materials costs have surged. Skilled labour shortages and an uptick in insolvencies across the building industry have also slowed the commencement of new builds.?
As a result, apartment construction remains at historic low levels and the accords targets seem far from reach.??
领英推荐
Without meaningful action to rectify some of these hurdles, delivering enough new houses or apartments will be difficult and affordability will remain challenged in both the housing and rental market.?
Many have pointed to the continued need to reform planning and zoning restrictions to unlock more housing supply and fast track approvals.?
But other key focuses centre around boosting productivity and addressing critical shortages of skilled labour.??
Labour shortages have been one of the biggest drivers of cost increases and time delays.??
Industry productivity, innovation and advanced manufacturing techniques also play a role. By arresting the construction industry productivity decline seen over the past decade and enhancing productivity, existing industry output can be increased.?
Addressing issues hindering the expansion of housing supply are necessary to facilitate a faster supply increase and help put the brakes on the housing crisis.?
As the population grows, a combination of aiding new supply and policies that encourage better use of existing homes can help ease supply constraints.?
Want updates direct to your inbox?
PropTrack is Australia’s most reliable choice for property data, market insights and digital valuation solutions – utilising the latest artificial intelligence, machine learning techniques and software capabilities to power realestate.com.au and our customers. As part of our commitment to changing the way the world experiences property, PropTrack is helping organisations use transformative property data, develop new property experiences and automate valuations, enabling new solutions and services for the modern consumer. Join the millions of Australians who already use REA Group apps every month and transform your property experience. proptrack.com.au