Housing starts to fall 155,000 short of government’s 1.2 million target by 2028

Housing starts to fall 155,000 short of government’s 1.2 million target by 2028

Photo by Troy Mortier via Unsplash

Master Builders Australia has forecast that the construction industry will fall well short of the federal government’s revised target of 1.2 million new homes over the next five years amid concerns that industrial relations policies will be a major drag on output.

In an updated forecast for the industry to FY28 issued by Master Builders today, the industry suffered a massive 16.5 per cent slump in home building activity in FY23 with work estimated to have begun on 173,755 new homes during the year.

Another 2.1 per cent fall to around 170,100 home starts is expected in the current financial year, which Master Builders says is below the 200,000 homes a year needed to meet current population growth. Construction starts of more than 200,000 won’t start feeding into the market until FY26.

Master Builders Australia CEO Denita Wawn expects the downtrend to bottom out in FY24 before starting to pick up in FY25 ‘as supply bottlenecks loosen and we return to a more desirable investment market on the demand side’.

“We forecast new home starts will peak to just over 241,000 in 2026-27,” Wawn says.

“In good news, the projected volume of new starts over the five-year period up to 2027-28 exceeds the one million home target under the Housing Accord but only just.

“There is still a lot of work that needs to be done to achieve the revised target of 1.2 million homes as announced by national Cabinet last month.”

Master Builders estimates that the FY28 target will fall short by about 155,000 homes.

“However, it is not all doom and gloom, there are good reasons for believing we are overcoming the worst of the challenges as long as government policies do not hamstring these efforts,” Wawn says.

“The cost of building homes has been exacerbated over recent years with unnecessary delays and barriers encountered on their journey to completion. This includes planning impediments, lengthy approval processes and high developer charges on new land developments.

“We acknowledge the efforts of the Prime Minister, Treasurer and Housing Minister to prioritise and co-ordinate efforts across the federation to tackle the housing crisis, but there is a real risk the radical industrial relations agenda being pursued by Minister (Tony) Burke will negatively impact these efforts.

“It's like watching a lone dancer perform a different routine amidst a synchronised troupe – counterproductive and out of place.

“The productive capacity of the industry is critical to ensuring we can sustain high output levels.”

Master Builders has been a vocal opponent of the federal government’s planned changes to bridge the gap between pay and conditions for employees and contractors. However, the government says the changes are intended to target the gig economy.

Despite the fall in housing starts, construction activity in Australia rose 3.8 per cent to $226.4 billion in FY23, led by the non-residential and civil construction sectors.

“As the industry moves through the worst of the supply chain bottlenecks, 2023-24 is likely to be quite favourable for the non-residential and civil sectors thanks to work on transport and social infrastructure investment,” Wawn says.

“The investment into the non-residential sectors have provided a shield for lulls in residential activity until it picks up towards the end of the next five years.”

Master Builders expects non-residential building activity to peak at $54.27 billion in FY24 and steadily fall back to $51 billion by FY28.

This will be down from the $103 billion estimated to have been undertaken in FY23.

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