On January 17th, the ABS released its building activity data for the September Quarter 2023. The data provides estimates of the value of building work and the number of dwellings commenced, completed, and under construction across.
“Australia commenced construction of just 23,058 new houses in the September Quarter 2023, the weakest quarter in over a decade and down by 21.6 per cent on the same quarter last year,” stated Housing Industry Association (HIA) Senior Economist, Tom Devitt.
“This data reveals there were 103,707 detached houses that commenced construction in the twelve months to September 2023, down by 17.0 per cent on the 124,940 commenced in the previous twelve-month period,” he said.
M Devitt says this points to a slow start to the National Cabinet’s ambition to build 1.2 million homes over the next five years starting mid-2024.
“Since the (Reserve Bank of Australia) RBA’s first cash rate increase in May 2022, sales of new homes have tumbled. A number of earlier projects are also being cancelled, with banks withdrawing finance in the face of soaring building costs and shrinking homebuyer borrowing power.”
“This lack of new work entering the construction pipeline is expected to produce a trough in new house commencements in 2024 when Australia will start construction on just 95,400 new houses, the weakest year in over a decade,” Mr Devitt says.
There was also a decline in the number of multi-unit projects commencing construction, down by 9.6 per cent in the September Quarter of 2023 to just 13,916, one of the weakest quarters in over a decade.
“Multi-unit commencements are mounting a recovery on the back of population growth and land constraints, with Australia expected to commence 84,400 new multi-units in 2024,” said Mr Devitt.
“This would still put total detached and multi-unit commencements at less than 180,000 in 2024, far below the 240,000 per annum required to meet the National Cabinet’s target.”
As fewer new projects begin construction, the pipeline of work that Australia’s home builders have under construction is expected to shrink rapidly this year according to Mr Devitt.
“Meeting National Cabinet’s target will be largely dependent on the delivery of adequate private housing across the housing continuum. This will also have the biggest impact on the cost of housing and rental availability.”
“Holding all levels of government to account for improving planning regimes, reducing red tape, and supporting the development of appropriate infrastructure and a skilled construction workforce must be a priority this year,” concluded Mr Devitt.