New home construction forecast paints tough path ahead and time is running out to get things on track

The housing crisis continues, with both buyers and renters facing the worst affordability conditions on record.

National Cabinet has agreed the solution is building more homes, setting an ambitious target to build 1.2 million well-located homes over the next five years.

On top of this, PropTrack forecasts housing completions over 2024 will continue to be well-below target. In particular, New South Wales is expected to build just above half the number of units and townhouses that were built just six years ago.

The number of homes built in 2023 was the lowest in 10 years

New data on the number of homes constructed over 2023 showed little change over the past four years, with fewer homes being built than in any year since 2013, according to the Australian Bureau of Statistics.

This rate – of around 170,000 homes a year – is well-below the 240,000 needed to hit the National Cabinet target.

While home building rates appear consistent over the past few years, given the growth in both population and homes over that period, it reflects quite a decline in home building output.

This decline has been due to numerous issues, not least financial difficulties and insolvencies among builders in the face of escalating costs, as well as difficulties securing enough skilled workers to complete construction.

These issues have contributed to significant blow-outs in average construction times across the country – with even houses taking 40% longer to construct than before the pandemic.

The forecast for home construction in 2024 remains below pace

Using data on dwellings approved for construction, as well as average construction times for different types of homes across the country, allows a forecast for home construction this year, and where those homes will be built.

In aggregate, just 166,000 homes are forecast to be completed in 2024. This is just two-thirds the target rate set by national cabinet.

The significant increase in construction time for houses is contributing to just 98,000 houses forecast to be completed in 2024. This is well below the consistent 110,000 to 120,000 rate that has been achieved over the past decade. However, conditions in the detached house building have started to improve, and with luck, construction this year will achieve similar rates as in past years.

By contrast, unit and semi-detached construction is estimated to pick-up in 2024. We estimate more than 68,000 completions this year, the largest number since 2020.

While encouraging, this is still well below the pace needed to reach the national cabinet target. Realistically, we need to complete around 120,000 higher-density homes a year – a pace that wasn’t even reached in 2016-2018 construction peak.

A good start would be reaching construction levels hit before the pandemic

Before the pandemic, in 2017 and 2018, just less than 100,000 higher-density homes were being completed a year.

Continuing the recent rate of house construction of around 120,000, and achieving these construction rates for higher-density homes would get very close to hitting the ambitious National Cabinet target.

Many of these will be built in NSW, Victoria and Queensland. But all of the regions are forecast to be substantially below the peaks in home building they achieved before the pandemic.

In NSW, this shortfall is estimated to be just over 20,000 homes this year. That means only just above half the number of higher-density homes are expected to be completed in NSW this year compared with just six years ago.

It is no wonder the NSW Government have enacted sweeping reforms to unlock higher-density supply near transit hubs – due to come into force imminently.

The shortfalls in Victoria and Queensland are expected to be smaller – but still significant, at close to 10,000 homes each.

It is clear more needs to be done to enable higher-density development over the coming period to meet the National Cabinet goals for home construction, and to ease strained housing affordability. But with these homes taking one to two years to build, on average, time is running out to get enough homes started to meet these ambitious goals.

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