Despite record levels of migration, the number of new homes commencing construction is set to slow for at least the next 12 months according to HIA Chief Economist Tim Reardon.
Mr Reardon’s based his forecast on the latest HIA economic and industry outlook report which provides an updated national forecast for new home building and renovations.
“This report reveal there has been a rapid slowdown in the volume of new building projects entering the pipeline, especially new apartments, over the past year,” he said.
“The sharp increase in the cash rate has compounded the barriers created by extraordinary restrictions on lending and investing, increased construction costs and regulatory costs.
“The rise in the cash rate is the key reason for the slowdown in the number of new homes commencing construction. There are long lags in this cycle and the full impact of the increases to date will not be apparent, until late 2024.
“Leading indicators of home building activity have fallen to exceptionally low levels. New home sales are almost 50 per cent lower than a year ago. Lending for the purchase or construction of a new home has fallen to its lowest level since 2008.
“The slowdown in the commencement of new homes is counter to the goal of increasing supply and delivering one million homes over the next five years.
“Beyond the rise in the cash rate, the supply of new homes is also constrained by a range of regulatory and cyclical challenges. The Government’s Housing Australia’s Future Fund isn’t a solution to all of these problems, but it is a necessary step toward improving the supply of new homes.
“Removing barriers to investment, reforming local council planning processes and stable economic settings are also necessary steps,” concluded Mr Reardon.