Full steam ahead to clear construction backlog

Although the building industry is being put to the test with supply chain and staff shortage concerns, the sector is putting in a big effort to clear the backlog of projects on the books.

The most recent data from the HIA shows that although commencements of detached homes fell by 11.1 per cent in the first quarter of the year, which is down from the peaks of the HomeBuilder boom, the construction figures are still stronger than pre-COVID levels.

HIA economist Tom Devitt said that the industry has also sustained total commencements for the last 12 months at 143,037, a record high.

“The slowing in commencements is not due to slowing demand,” he said.

“Home building activity in the first quarter of 2022 was held back by staff shortages associated with the Omicron outbreak and the higher than usual uptake of holiday leave.”

The new data shoes that detached completions also managed to climb by 10.8 per cent, from 28,098 in December 2021 quarter to 31,145 in March 2022.

This is the strongest quarter of completions since September 2018 and represents the gradual but continued progress being made in the HomeBuilder pipeline.

Despite the rise in completions and decline in commencement of new homes, the volume of detached work under construction is almost 80 per cent above its pre-pandemic levels.

This was driven by the combination of the HomeBuilder grant and record low interest rates.

Even after the end of the grant, all the extra time Australians were spending at home either working or locked down, resulted in a pandemic trend towards space and amenity, this kept demand for new housing and renovations elevated.

Other indicators, such as building approvals, finance approvals and new home sales, continue to show a strong volume of work entering the pipeline.

In addition to this, the multi-unit market is also strengthening.

Multi-unit commencements increased by 1.8 per cent in the March 2022 quarter to be 29.7 per cent up in the last 12 months compared to the previous year.

This improvement has been seen in both high-rise and medium density units.

Mr Devitt said that with interest rates and the cost of building increasing rapidly, affordability constraints will increasingly push home buyers back towards more affordable, higher density living and with the return of migration, demand for units should continue to strengthen.

“The combination of all these demand and supply factors, an enormous pipeline of detached and renovations work, rising interest rates, the return of overseas migrants, and ongoing supply constraints, will keep Australian builders busy in 2023,” Mr Devitt said.