Australia is under-supplied of 26,000 New Homes that were not built
Australia is under-supplied of 26,000 New Homes that were not built
After one of Australia’s biggest property booms, we are still around 26,000 new homes short of the needed supply.
Construction of homes increased in 2020 and 2021 and there are currently 100,000 detached houses being built around Australia, which is an increase from the approximate 60,000 a year under construction pre-pandemic.
The time taken to build a house is normally fairly consistent, particularly compared to apartments, for example, which vary significantly depending on the size and type of the unit development.
The Australian Bureau Statistics (ABS) estimate it typically takes between two to three quarters to complete a detached house once construction commences.
The gap between what we’d normally expect to have completed in the past five quarters and what we have actually completed amounts to 26,000 houses. Longer construction times probably account for as much as two-thirds of the increase in the pipeline we’ve seen in the past two years.
To put it another way, if we were constructing houses on the sorter timeframe than we normally do, the pipeline of houses under construction would be around 75,000 to 80,000 houses instead of more than 100,000.
There are numerous reasons why it’s taking longer to build homes, including disruptions from weather and illness, difficulties obtaining materials due to disruptions in international supply chains, rapidly escalating building costs.
Another huge problem is insurance companies paying tradesmen triple the award wage to repair storm damaged houses, leaving the construction industry without enough workers.
Dwelling construction is the most interest rate sensitive part of economic activity, so we’d normally expect to see it slow when interest rates rise.
We’ve already seen building approvals and commencements slow significantly from where they were during the pandemic. But the decline in activity will probably be later and slower than we’d normally see, given how much work is still yet to be finished.