New Home Starts Slide Again

The number of homes commenced in Australia continued to decline last quarter with a fall of 29 per cent year-on-year.

According to the ABS Building Activity report for the June 2022 quarter, the total number of homes begun in the quarter, 48,076, was down 28.9 per cent on the June 2021 quarter—and down 2.7 per cent on the previous quarter.

Apartments at 16,348 led the decline with a 31.8 per cent fall for the year and 3.1 per cent on last quarter after a fall of 4.9 per cent in the March quarter.

New houses at 30,602 slid 27.9 per cent year-on-year and were down 0.2 per cent on last quarter after a fall of 4.9 per cent in the March quarter.

However, the total number of homes under construction reached a record high of 241,926 in June, up another 0.7 per cent increase from the record high in March of 240,156 homes.

This increase was driven by new houses, which have increased to record highs since March 2021, with 102,908 new private houses under construction in June 2022.

The value of total building work done fell 3.6 per cent to $29.9 billion in the June quarter, in seasonally adjusted terms.

The fall was driven by new residential building work done, which fell 6.1 per cent to $15.0 billion and follows a rise of 1.8 per cent in the March quarter.

Homes commenced, seasonally adjusted

^{Source: ABS}

Non-residential building work done fell 0.5 per cent to $12.2 billion while work done on new houses fell 11.8 per cent to $8.9 billion.

However, work on new other residential building rose 3.7 per cent to $6.1 billion.

Master Builders Australia chief executive Denita Wawn said while the volume of new detached house starts was still higher than in the lead-up to the pandemic, the phasing out of exceptional fiscal and monetary stimulus propelling new home building starts meant the figures were not surprising.

“Despite the volume of new home starts dropping over the past year, there were still over 240,000 new homes under construction at the end of June,” Warn said.

“This is higher than ever and is related to the supply bottlenecks in the building pipeline which are slowing the pace at which new homes can be built.”

But, Warn said, the MBA predicts that over the next three years new home building starts will fall significantly short of 200,000 a year, the volume of output that ia needed to meet demand.

“Our forecasts indicate this threshold will not be exceeded until 2026,” she said.

“The MBA’s 2022-26 residential forecasts predict a bumpy road with a downturn over the next few years. Forecasts will trend upwards as inward migration and interest rates stabilise, and pent-up demand shifts the dial.”

HIA economist Tom Devitt said Australian home builders were still struggling to complete the enormous pipeline of work they accumulated over the past two years.

“With more houses still being commenced than completed, Australian home builders now have 104,228 detached houses under construction, a record pipeline that is 81.2 per cent larger than what existed pre-pandemic,” he said.

“Supply constraints are continuing to hold back completion of these projects. Materials constraints have plagued builders during the past two years, and shortages of skilled trades have only become more acute.

“These supply constraints will keep Australia’s home builders busy this year and next as they continue to work down this record volume of detached house projects.”