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Building Activity Surges to Four-Decade High

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Building activity has surged by 23.2 per cent in the three months to June, the highest quarter of building activity in four decades.

Work began on almost 65,000 dwellings during the period, driven by a combination of the HomeBuilder stimulus, state-based housing grants and record low interest rates.

The surge in the June quarter was led by construction on apartments, which rose 47.5 per cent after a -9.6 per cent fall in the first quarter of the year.

Construction on private houses lifted by 13.7 per cent to a record high 40,820 homes, building on a 6 per cent increase in the three months to March.

Nicholas Proud, chief executive of PowerHousing Australia, the national independent peak body for large scale social and affordable housing, said the result meant building commencements were well on track to surpass the previous peak, 234,000 in 2016, by the close of the year.

“There are questions ... about how long these record commencements will last amidst low and declining population growth and when house price growth come back to more stable quarterly rises,” Proud said.

“Like praying for rain when in drought, we can only hope that this will impact house prices to come back to a stable CPI-type gain in the future and, over time, bring some affordability back to a landscape that metaphorically is in an affordability drought.”

Private dwellings commenced, seasonally adjusted


Commencements rose strongly in all states except for Western Australia and the ACT.

Despite remaining under stay-at-home orders and enduring a sharp slowdown in population growth due to international border closures and negative net interstate migration, commencements were highest in Victoria.

“Across the capitals, and against the world’s longest lockdowns, the Victorian commencements were ahead of every other state... ,” Proud said.

“We see that New South Wales and the Sydney activity is picking up momentum in the last quarter with 19,860 commencements compared to their activity earlier in the year.

“At 13,799 new starts, South Australia also saw some green shoots recording its highest year of residential commencements.”

Residential approvals pulled back in July as housing approvals lowered following the completion of the HomeBuilder scheme yet lifted again in August, led by an uptick in apartments moving through the system at the fastest rate since March.

CommBank senior economist Kristina Clifton said despite this the slowdown had not been a collapse, as figures moved closer to the “normal” level of approvals for detached homes prior to the pandemic.

“The big lift in commencements in the second quarter indicates that residential construction will be strong in the coming quarters,” Clifton said.

“However, some activity will be pushed into the fourth quarter of the year and beyond as both NSW and Victoria faced periods of shutdown to the construction sector in the third quarter and also tougher rules around the number of workers allowed on site.”

The value of total building work done fell by -0.2 per cent to $30.3 billion in the June quarter, seasonally adjusted.

The fall was driven by new residential building work done, which fell -0.7 per cent to $15.9 billion.

Work on new houses fell -0.4 per cent to $9.9 billion, while new other residential building fell -1.3 per cent to $6.1 billion. Non-residential building work done rose 0.9 per cent to $11.6 billion.

“Working from home and the desire for more space may have seen a shift in preferences,” Clifton said.

“[However] the lack of foreign students, who tend to live in apartments, has dampened demand for multi‑units.

“The prices of construction materials have also risen sharply thanks to strong domestic and international demand and some supply constraints and we are also hearing reports of skill shortages in the construction sector.”

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Article originally posted at: https://www.theurbandeveloper.com/articles/building-activity-hits-four-decade-high-june-2021