Builders and tradespeople across Australia are set to remain at full capacity for at least one more year as the latest forecast suggests that the boom in detached home construction has at least twelve months to run.
But the activity will place more pressure on labor and material prices and supply.
In its latest report, Housing Industry Association has released its forecasts for new home building and home renovations activity nationally and for each of state and territory.
It says that overall, the number of dwelling commencements is expected to ease back from sky-high forecast levels of 205,550 in 2021/22 to still historically elevated levels of 199,670 in 2022/23 and 189,580 in 2023/24.
Speaking of the detached home building segment of the market, HIA says it expects the number of commencements to continue ease back from massive levels of 128,790 in 2021/22 (forecast) to still elevated levels of 122,030 in 2022/23 before dropping back to still respectable levels of 108,890 in 2023/24
But it says the volume of new homes in the pipeline will keep builders at full capacity for at least one more year.
All up, Australia had 101,022 single detached houses under construction as of December 31 – a level which is more than 40 percent higher compared with pre-COVID levels of 57,476 in December 2019 and the highest on record since the dataset commenced in 1960.
In its forecast, HIA said it expects the number of single detached homes under construction to remain at this level until at least the middle of 2023 (see chart).
Meanwhile, it expects activity in multi-unit construction (units/apartments/townhouses etc.) to continue to recover as several factors drive demand despite rising interest rates.
These include an acute rental shortage, a deterioration in affordability of detached homes and early signs that migration may be returning.
All up, HIA expects the number of multi-unit starts to edge up from 76,750 in 2021/22 (forecast) to reach just over 80,000 by 2023/24.
HIA Chief Economist Tim Reardon welcomed the outlook but warned that the continued strength in activity will place further pressure upon labor and material supply and prices.
He says a shortage of materials has emerged globally as the spending of more time at home has seen households around the globe seek additional space.
“This strong ongoing demand has occurred at the same time as significant constraints on materials, land and labour, leading to rapid increases in the cost of construction,” Reardon said.
“The ABS estimates that the cost of home building materials, not including the cost of labour, increased by 15.4 per cent in the year to March 2022. On the ground, the increases are higher still. This is the fastest annual increase in the official estimate of home building materials since 1980 and they are still rising.
“The United States has seen an almost identical cost increase with material costs for residential construction estimated to have increased by 21.2 per cent over the year to April 2022 compared to the previous year.
“With detached home building remaining at capacity until at least June 2023 and the volume of multi-unit commencements increasing, the shortage of building materials and labour will continue to be the main pinch point for the industry.”