According to The AFR, “borrowing for housing construction is 75 per cent higher than July, after the federal government introduced the HomeBuilder grants in response to COVID-19 and other home building grants offered by state governments”:
Finance approvals for housing construction reached new highs, which Goldman Sachs economist Andrew Boak said “bodes well for the outlook for building approvals and residential investment over the coming quarters”.
The data speaks for itself.
There are 1001 words left in this subscriber-only article.
Construction finance commitments rose a massive 99% year-on-year in November, easily exceeding the GFC peak when generous $14,000 First Home Buyer Grants were in play:
Detached house approvals also hit a 20-year high in November:
While the stimulus is successfully boosting new construction and supporting the economy, the pull forward of supply risks creating a construction bust in the future.
The latest projections from the National Housing Finance & Investment Corporation (NHFIC), released last month, forecast that dwelling construction will collapse in 2022 and 2023 as stimulus unwinds:
According to NHFIC, net annual dwelling additions will decline from 180,900 to 159,500 in 2022 and then to only 120,500 in 2023.
Thus, if these forecasts materialise, then the housing construction industry faces a deep contraction.
This will inevitably put pressure on federal and state governments to extend stimulus to prevent the downturn. It will also encourage the federal government to reboot mass immigration to backfill supply.
Expect heavy lobbying from the usual suspects, including the Housing Industry Association, the Master Builders Association, and the Property Council.
Australia is the property equivalent of a narco state, after all.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
Latest posts by Unconventional Economist (see all)
