Australia’s boom in detached home building is set to continue for another two years, the latest forecasts suggest.

Releasing the Spring edition of its HIA National Outlook report, Housing Industry Association (HIA) said it expects the number of commencements on detached residential homes to come in at 133,100 in 2021/22.

This is second on record only to the 139,220 homes which were constructed in 2020/21 and well above the 100,000 or so which is expected in a relatively normal year.

Beyond that, detached home commencements are set to remain at elevated levels of 115,700 in 2022/23 before dropping back to 100,210 in 2023/24.

This will see overall dwelling commencement numbers come in at elevated levels of 203,820 in 2021/22 and 187,810 in 2022/23 before dropping back to 171,140 in 2023/24.

But commencements on multi-unit construction are expected to remain at subdued levels see chart).

HIA Chief Economist Tim Reardon says several trends are influencing demand for new homes.

In particular:

  • The shift in preference toward lower density housing continues. Even following the end of HomeBuilder in March, sales of new detached homes between April and October have been stronger than at any other time since 2017.
  • The shift is not only from unit and apartments to detached housing but also toward having fewer people living in each home – a phenomenon which has resulted in greater levels of housing demand overall.
  • The detached home building boom will subside once the full effect of the loss in migration comes through and interest rates begin to rise.
  • Whilst activity in medium-density housing and high-rise apartments remains constrained, bright spots are emerging in multi-residential construction as approvals in this sector are trending higher, investors are ‘looking through the haze of the pandemic to a brighter outlook on the other side’ and affordability constraints are pushing households back to townhouses and apartments – particularly first-home buyers.
  • Cost pressures will remain as the industry will continue run at full capacity throughout 2022 and will be constrained by the availability of land, labour and materials. Over the year to September, the price of skilled trades increased by 5.2 per cent, while the price of materials as measured by the ABS increased by 8.0 per cent. The price of residential land increased by 8.5 per cent in the 2020/21 financial year.