Realistic Assessment of Australia’s 1.2 Million New Homes Target: An Unattainable Goal

⚡️ Highlights:

1. The National Cabinet announced a plan to build 1.2 million new dwellings over five years, but they will not be directly involved in construction. Instead, they plan to ease planning and zoning laws to encourage private developers to build the necessary homes.

2. Australia’s previous record for new home construction was around 223,000 in 2017. Achieving the National Cabinet’s target of 1.2 million homes would require a level of construction that has never been achieved before.

3. The construction industry is facing challenges such as high interest rates, elevated materials costs, builder failures, and labor shortages. These factors make it even more difficult to meet the ambitious housing target.

4. Construction indicators have already fallen to decade lows, with only 164,200 homes approved for construction in the year leading up to October. New home sales and loans are also at historical lows, indicating a decrease in construction activity.

5. Experts, such as Phil Dwyer from The Builders Collective, believe that the 1.2 million homes target is unrealistic and will not be met. He warns of potential insolvencies among sub-contractors and emphasizes the need to address the housing shortage by reducing population growth. If population growth continues to outpace housing supply, the housing crisis in Australia will worsen.

Evaluating the Feasibility of the National Cabinet’s Ambitious Housing Plan

The National Cabinet’s announcement in August 2023 of a five-year plan to construct 1.2 million new dwellings, starting from 1 July 2024, has raised significant concerns among industry experts regarding its feasibility. The plan, which relies on easing planning and zoning laws to encourage private developers to build more homes, faces several formidable challenges.

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Challenges in Achieving the Housing Construction Target

Australia’s record for new home construction peaked at around 223,000 in 2017. The National Cabinet’s target, which requires building 240,000 homes annually for five consecutive years, demands an unprecedented level of construction that the Australian building industry has never achieved before. This ambitious goal is further complicated by the current environment of high interest rates, elevated materials costs, widespread builder failures, and endemic labor shortages, as the construction industry competes with infrastructure projects for workers.

Current State of the Construction Industry

Recent construction indicators have shown a significant downturn, with approvals for only 164,200 homes in the year to October, approximately 56,000 fewer than the target. Additionally, new home sales and loans for the purchase and construction of new homes are tracking near historical lows, signaling a potential decrease in future construction activities.

Expert Opinions on the Feasibility of the Target

Phil Dwyer from The Builders Collective, in an interview with 7 News, stated outright that the National Cabinet’s 1.2 million homes target “can’t, won’t happen.” He also warned of a “ripple effect” of insolvencies hitting subcontractors, further exacerbating the challenges in the construction sector.

Alternative Solutions to the Housing Shortage

Given the impracticality of meeting the 1.2 million new homes target, experts suggest that the only realistic solution to solving the nation’s housing shortage is to significantly slow population growth by reducing net overseas migration. This approach would align population growth with the country’s capacity to provide new housing and infrastructure, thereby preventing further deterioration of Australia’s housing crisis.

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The National Cabinet’s plan to build 1.2 million new homes faces significant hurdles, casting doubt on its achievability. The construction industry’s current state, coupled with economic and labor challenges, suggests that alternative strategies may be necessary to address the housing shortage effectively. Reducing net overseas migration to match the housing supply capabilities appears to be a more viable solution to mitigate the ongoing housing crisis in Australia.

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