1. Construction of new houses in Australia in the September Quarter 2023 was the weakest in over a decade, with only 23,058 new houses built, a decrease of 21.6% from the same quarter the previous year.
2. The number of detached houses commenced construction in the twelve months leading up to September 2023 was down by 17% compared to the previous twelve-month period.
3. The slow start to the National Cabinet’s goal of building 1.2 million homes over the next five years suggests a potential challenge in meeting this target.
4. Sales of new homes have declined since the Reserve Bank of Australia’s cash rate increase in May 2022, leading to canceled projects and decreased borrowing power for homebuyers.
5. The number of multi-unit projects commencing construction also declined in the September Quarter 2023, one of the weakest quarters in over a decade. However, a recovery is expected with population growth and land constraints, leading to an estimated 84,400 new multi-units in 2024.
A Critical Analysis of the Housing Industry’s Struggles to Meet National Goals
Australia’s housing industry is facing a significant challenge in meeting the National Cabinet’s ambitious target of constructing 1.2 million new homes over five years starting mid-2024. According to HIA Senior Economist Tom Devitt, the country commenced construction of just 23,058 new houses in the September Quarter of 2023, marking the weakest quarter in over a decade and a 21.6% decrease compared to the same period last year.
Key Findings from the ABS Building Activity Data
- Detached Houses Commencements Decline: There were 103,707 detached houses that commenced construction in the twelve months to September 2023, a 17.0% decrease from the previous twelve-month period.
- Slow Start to National Cabinet’s Ambition: The data indicates a slow start to the National Cabinet’s goal, with new home sales tumbling since the RBA’s first cash rate increase in May 2022.
- Cancellation of Projects: Many earlier projects are being canceled due to banks withdrawing finance in the face of soaring building costs and shrinking homebuyer borrowing power.
- Projected Trough in New House Commencements: In 2024, Australia is expected to start construction on just 95,400 new houses, the weakest year in over a decade.
- Decline in Multi-Unit Projects: The number of multi-unit projects commencing construction also declined by 9.6% in the September Quarter of 2023.
Challenges in Meeting Housing Targets
The data suggests that total detached and multi-unit commencements will be less than 180,000 in 2024, far below the required 240,000 per annum to meet the National Cabinet’s target. This shortfall highlights the need for improved planning regimes, reduced red tape, and support for infrastructure development and a skilled construction workforce.
Australia’s struggle to commence enough housing to meet the 1.2 million target underscores the challenges facing the construction industry. With fewer new projects beginning construction, the pipeline of work under construction is expected to shrink rapidly. Addressing these issues is crucial for meeting the housing needs of the nation and supporting the overall economic growth.