Australian home building activity stuck at decade lows, HIA reports

New home construction in Australia remains at its lowest levels in more than a decade, with just 168,050 new homes commencing construction in 2024, according to the Housing Industry Association (HIA).

The figures were revealed in the latest Australian Bureau of Statistics building activity data for the December quarter 2024, which provides estimates of building work and dwelling commencements across Australia.

HIA Chief Economist Tim Reardon said the construction downturn is causing skilled workers to leave the industry, which threatens future building capacity.

“Home building is currently at the bottom of a cycle and is losing skilled workers to other industry sectors, which impedes future building capacity,” he said.

The current construction levels fall well short of Australia’s historical building rate and future needs, according to the industry body.

“Australia has consistently built more than 200,000 homes each year and will need to exceed 250,000 annually to meet the Australian Government’s 1.2 million homes target,” Reardon said.

The exodus of skilled tradespeople from home building presents a significant challenge for the sector’s recovery as economic conditions improve.

“The more workers that are lost from the home building sector in this cycle, the harder and more expensive it will be to increase that capacity, as interest rates fall and activity picks up,” he said.

Reardon noted that Australia’s low unemployment rate is creating a paradoxical situation for the construction industry.

“The exceptionally low level of unemployment in Australia is a double-edged sword for the industry as it creates demand for new homes and at the same time, leads to higher labour costs to build a new home,” he said.

With the federal election campaign underway, Reardon addressed recent housing policy announcements from the major political parties.

“In the short term, the only measure that an incoming Australian Government can do to increase the supply of new homes is to offset the cost of taxes fees and charges, by providing financial support for those that build a new home,” he said.

He suggested potential measures could include removing costs such as Lenders Mortgage Insurance or creating incentives for first home buyers to build rather than purchase established homes.

Reardon described these as “easy-good” solutions but emphasised they shouldn’t replace long-term structural reforms.

“This doesn’t negate the need for the ‘hard-smart’ policies tackling land supply, infrastructure costs, planning regimes and delays to home building and reform of taxes on new homes,” he said.

The HIA economist warned that meaningful policy changes are needed to boost housing supply, with current projections falling far short of targets.

“HIA forecasts that only 983,530 new homes will commence construction over that five-year period, unless meaningful changes to remove the barriers to supply are made,” he said.