The most recent data on building activity, released by the ABS for the September Quarter 2023, paints a concerning picture for Australia’s housing market. The figures show that the construction of new houses has significantly dipped, marking the lowest activity in over a decade and a considerable 21.6 per cent decrease from the prior year’s quarter.
Tom Devitt, the Senior Economist at HIA, flagged the worrying trend, saying, “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.”
This data indicates an alarming 17.0 per cent drop in the construction of detached houses within the twelve months to September 2023, which translates to a stark reduction from 124,940 in the previous twelve months to a current total of 103,707 new commencements. These findings are setting the stage for a sluggish start towards fulfilling the National Cabinet’s ambitious goal of constructing 1.2 million homes over the coming five years, beginning mid-2024.
Devitt elaborated on the concerning climate, stating that “Since the RBA’s first cash rate increase in May 2022, sales of new homes have tumbled.” He added that complications are amplified as a number of projects get canceled and banks retract financing due to surging building costs compounded by the decline in homebuyer borrowing capacity.
Projections show a troubling scenario for 2024, with expectations for new house commencements to plummet to 95,400—the lowest number in over a decade. The decline isn’t restricted to detached houses alone; multi-unit projects also saw a decrease, slipping by 9.6 per cent in the September Quarter 2023 to a mere 13,916 commencements. Although there is hope for a recovery in multi-unit commencements, driven by population growth and land limitations, the forecast for 2024 pegs new multi-unit commencements at 84,400.
Despite this anticipated recovery, estimates for total detached and multi-unit commencements in 2024 fall well below the yearly requirement of 240,000, necessary to reach the National Cabinet’s target. Devitt pressed the urgency of the situation, concluding that “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.”
He advocated for accountability from all government levels to improve planning regimes, cut through red tape, and offer support in developing infrastructure and a skilled construction workforce, marking it as a pivotal focus for the year ahead.