Building activity lags behind national housing goals

Scott Kuru October 9, 2024 4 min read

Image by Glenn Hunt

KEY POINTS

New dwelling commencements fell 1.1% in the June quarter of 2024
Home completions rose 7.3% from the previous quarter and were 9.2% up on the previous year
Fall in new dwelling commencements in the June quarter is a “particularly worrying sign” for the Housing Accord targets

New data from the Australian Bureau of Statistics underlines the considerable challenges facing the construction industry as it struggles to build more homes to ease the housing crisis.

The comprehensive Building Activity numbers also show the mammoth task that will be needed to boost housing supply to come anywhere near the national target of building 1.2 million new homes by the middle of 2029.

The details

The latest Building Activity release contains a comprehensive data set which shows the state of construction in Australia in the June quarter (April, May and June) of 2024.

This dataset is particularly interesting because it is the last full quarter of building information before the official start of the National Housing Accord period, which began on the 1st of July 2024.

The National Housing Accord is an agreement between the federal and state governments and the building industry which aims to see 1.2 million new homes in Australia built by the 30th of June 2029.

Building commencements

The ABS says the total number of dwellings commenced in the June quarter of 2024 fell 1.1% to 40,293 dwellings, while the value of total building work done fell 0.2% to $34.0b.

While new freestanding house commencements rose 1.7% to 25,732, the “new private sector other residential” commencement number fell 7.4% to 13,756 dwellings.

“New private sector other residential” is the catch-all term the ABS uses to describe apartments and multi-unit developments.

These are precisely the kind of high-density accommodation the state and federal governments say they want to see more of in “in-fill” locations of our big cities, close to existing infrastructure and services.

However, developers have been abandoning or putting many large apartment projects on hold, complaining that many just don’t stack up financially.

That’s why commencements are now 12.3% lower than the June quarter of 2023 for this category of housing.

“Buyers continue to shy away from apartments, even in some prime locations, keeping prices low and well below replacement cost,” Melbourne developer Maxwell Shifman says.

Mr. Shifman is a Past President of the Urban Development Institute of Australia and the CEO of Intrapac, a development company which specialises in larger residential buildings.

“New apartment development is much more expensive than the market is willing to pay due to taxes, charges, planning and input cost issues,” he says.

“This is why relying on this style of project will not be the solution to solving the housing crisis or meeting housing targets in the short term.”

“Meanwhile, whilst the market remains soft across parts of the country, townhomes and greenfields (developments) will be far quicker to recover and will deliver better and more attainable homes at scale for home buyers of all kinds - if they can just be made a reality,” Mr. Shifman says.

Dwellings under construction

According to the ABS, there were 221,533 dwellings under construction in the June quarter of 2024.

While this seems like a lot, it’s worth noting that only 88,235 of these were new homes, and some of those would be knock-down rebuilds on an existing home site.

Completions

The third and final phase of the building process after all permits and approvals are obtained and construction actually starts, is completions.

The ABS data actually contains some good news here.

44,853 dwellings were completed during the June quarter of 2024.

That’s up 7.3% on the previous March quarter and 9.2% up on the previous year.

“Although it is encouraging to see an increase in the number of completed homes, today’s figures show how far we have to go if we hope to reach our 1.2 million new homes target,” says Matthew Kandelaars, the Group Executive Policy and Advocacy head for the Property Council of Australia.

According to Mr Kandelaars, the ABS figures show Australia is building 15,000 fewer homes than needed each quarter (or 60,000 homes fewer each year) to reach the 1.2 million new homes by 2029 target.

“This should be achievable, but all the data is currently pointing to failure.”

Mr. Kandelaars says the poor housing commencement figures don’t bode well for the National Housing Accord targets.

"That new housing commencements are down is a particularly worrying sign, and shows how fragile our housing pipeline is,” he says.

“We need governments at all levels working in partnership to deliver the homes Australians need.

Master Builders Australia says the data reveals that 2023-24 was the worst year for home building in more than a decade, dropping 8.8% when compared to the previous financial year with just 158,690 new starts.

“Detached house starts fell by 10.1 per cent, while higher density commencements were down by 6.0 per cent,” says Master Builders Chief Economist Shane Garrett.

“If building continues at this pace, we’ll be in for less than 800,000 new home starts over the next five years.

“This would mean a shortfall of over 400,000 homes compared with the National Housing Accord target.”