In a concerning development for the Australian housing market, recent data released by the Australian Bureau of Statistics (ABS) reveals that the country has fallen significantly short of its housing construction target. The Housing Industry Association’s (HIA) Senior Economist, Tom Devitt, highlighted that Australia initiated the construction of a mere 23,058 new houses in the September Quarter of 2023, marking the weakest quarter in over a decade and a substantial 21.6% decrease from the same quarter the previous year.
According to Mr. Devitt, the ABS building activity data for the September Quarter 2023 unveiled a broader challenge. In the twelve months leading up to September 2023, only 103,707 detached houses commenced construction, reflecting a notable 17.0% drop from the previous twelve-month period’s figure of 124,940.
“This data points to a sluggish start to the National Cabinet’s ambitious plan to build 1.2 million homes over the next five years, set to begin in mid-2024,” Mr. Devitt emphasized.
The decline in housing construction is attributed to several factors, including a significant drop in new home sales since the Reserve Bank of Australia’s first cash rate increase in May 2022. Additionally, escalating building costs and reduced borrowing power for homebuyers have led to the cancellation of various projects, with banks withdrawing financing.
The situation is expected to worsen in 2024, with projections indicating that Australia will commence construction on just 95,400 new houses—a record low for over a decade.
The multi-unit housing sector is also experiencing a downturn, with a 9.6% decline in commencements in the September Quarter 2023, totaling just 13,916—another decade-low figure.
Although there is optimism for a rebound in multi-unit projects due to population growth and land constraints, Mr. Devitt warns that Australia is still set to fall significantly short of the National Cabinet’s target. Projections suggest that even with a recovery, the total number of detached and multi-unit commencements in 2024 is expected to be less than 180,000, significantly below the required 240,000 per annum to meet the ambitious target.
Mr. Devitt concludes that meeting the National Cabinet’s housing target will heavily rely on the delivery of adequate private housing across the housing continuum. Holding all levels of government accountable for improving planning regimes, reducing red tape, and supporting infrastructure development and a skilled construction workforce is crucial, according to Mr. Devitt, especially in the face of the challenges currently faced by the Australian housing market.
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