Home building set for a record year but HIA warns of population shock in 2023

Home building set for a record year but HIA warns of population shock in 2023

A shift in the dynamics of the Australian property market is expected to boost construction of detached housing to record levels in 2021, although the good times won't last long, warns the Housing Industry Association (HIA).

The boom will be stronger in regional areas, according to the HIA 's Outlook Report which has forecast almost 130,000 new detached homes to start construction this year.

This is 10,000 more homes than the previous high for any calendar year set in 2018.

In comparison, the outlook for apartments has soured due to the lack of overseas migration, leading the HIA to air its concerns for the industry beyond 2023 when the "population shock" will hit.

HIA chief economist Tim Reardon says the detached housing surge has been supported by the federal government's HomeBuilder stimulus package, but its key driver can be linked to a shift in demographics across the country as city-dwellers seek out a new life in regional areas.

"All leading indicators show a record volume of detached homes about to commence construction and this is occurring in almost every location across Australia," Reardon says.

"The extension of HomeBuilder in November is the primary cause of this significant upgrade in our forecast, but the demographic shifts are also driving demand for detached homes.

"Regional locations in many states are showing a larger increase in activity than capital cities as the population moves away from inner-city living."

Reardon says the good news for the industry is the housing construction boom will support 500,000 jobs already in the industry and absorb "tens of thousands of workers from across the rest of the economy".

"The strong conditions for detached homes are in stark contrast to the outlook for multi-units, which will continue to cool.

"The loss of overseas migration hit the multi-unit sector immediately and the number of new unit starts is falling rapidly. The population shock is yet to flow through to detached."

The HIA sees job losses from apartment construction being absorbed by the detached housing market for the next two years. However, the biggest challenge for the industry will be availability of land.

"Land development slowed in 2020 when the restrictions were introduced and will limit the number of homes that start construction this year," says Reardon.

"The supply chain of building products will be stretched, but many building components are manufactured in Australia including cement, bricks, plasterboard and timber.

"The increase in manufacture of these building components will also create employment."

HIA reveals that first-home buyers are the biggest driver of the detached housing market by accounting for 43 per cent of new home loans.

"We expect that this demand will continue into 2022 as the significant shift in population continues and as investors return to the market."

Reardon says the party will be over for the industry by 2023.

"The record year has been facilitated by HomeBuilder, low interest rates and a significant shift in population. We anticipate that all of these trends will move against home building in 2023 along with the impact of the loss of overseas migration."

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