Builders to remain busy through to end of 2023
The most recent data released from the Australian Bureau of Statistics (ABS) that tracks monthly building approvals data for detached houses and multi-units shows that the construction industry will remain busy for some time yet.
April data reveals detached house approvals continue to be elevated compared to pre-COVID levels.
HIA Economist Tom Devitt said that with new work entering the pipeline, builders will be kept busy throughout 2023.
“Detached house approvals increased by 1.4 per cent in the three months to April 2022 to be 16.8 per cent higher than the same three months in 2019,” Mr Devitt said.
“Renovations activity also remains elevated with the value of renovations approvals jumping by 6.6 per cent in April to be up over the last 18 months by 42.6 per cent on pre-pandemic levels.”
At the end of 2021, there were 75.7 per cent more detached homes under construction than pre-COVID.
There are now more homes approved and waiting commencement than in any previous cycle.
Together with similar new home building and renovations booms in other developed economies, this has placed significant demands on the international supply of building materials, along with local supplies of land and labour.
This has combined to create ongoing increases in the cost of construction.
Mr Devitt said that this increase will sustain Australia’s elevated number of homes and renovations under construction and keep Australia’s already-stretched home builders busy until at least June 2023.
“It will also delay the adverse impact of rising rates on the industry, and therefore the wider economy.”
Multi-unit approvals also increased with this sector of the market up 7.4 per cent in the three months to April 2022.
An acute rental shortage and deterioration in affordability has seen strengthening demand for multi-units, including high rise apartments.
There are early signs that overseas migrants – who tend to favour higher density living – are returning.
These factors will support demand for multi-unit construction going forward.
“With detached home building and renovations activity remaining at capacity until at least June 2023 and demand for multi-units returning, the shortage of building materials and labour will continue to be the main pinch point for the industry,” Mr Devitt concluded.