Why housing construction will crash in 2022

New Treasury data shows that the federal government received 75,143 applications for the HomeBuilder grant during the first phase of the scheme, including more than 35,000 during the last three weeks of 2020.

The Treasury had forecast in June that it would receive just 27,000 applications for the grants by 31 December. The unexpected surge in demand for HomeBuilder will result in the cost of the scheme rising from $688 million to around $2 billion. It has also been behind the unprecedented rise in new home sales, as reported yesterday by the HIA:

As well as the huge lift in construction finance commitments:

And the strong lift in detached house approvals to 20-year highs:

Accordingly, the HomeBuilder scheme is now expected to boost residential construction activity by up to $18 billion over the next year and increase broader economic activity by $50 billion over this period:

The surge in applications for new dwellings or major renovations, will see the cost to the budget of the scheme balloon from its original $688m to upwards of $2bn. However, modelling of the new data shows the added activity will support more than $18bn worth of new construction over the coming year and deliver an unexpected boost to growth through the broader economy.

Economists have estimated that the combination of government grants and the commitments of home builders would drive more than $50bn in broader economic growth, with a three times multiplier effect on investment.

Beyond that, the picture is less rosy, with the strong pull forward of demand likely to crash dwelling construction in 2022 and 2023 as subsidies are withdrawn.

The HomeBuilder grant was extended by three months to 31 March, but at the lower rate of $15,000 (instead of $25,000) from 1 January. And from 1 April 2021, HomeBuilder is scheduled to end entirely.

Indeed, official forecasts from the National Housing Finance & Investment Corporation (NHFIC), released last month, projected that construction will dive off a cliff next year:

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, expect to see intense lobbying from property groups calling on the federal government to provide more subsidies, as well as to open Australia to migrants.

Without a return to the mass immigration population ponzi, the housing construction industry will eventually be forced to contract to meet lower levels of demand. They will fight tooth and nail to prevent this from happening.

Unconventional Economist


  1. No doubt whatsoever new subsidies will kick in when construction rates fall – irrespective of which party is in power.
    I have been a property bear since turn of century but no more – this asset class is backed by all Aussies.

    • True – we’ve been saying “18 months to two years” for so long on MB that its become a running joke.

      I’m also going to capitulate because I’m going to run out of years before the government runs out of ways to stimulate this ponzi scheme.

      • Ditto. What’s that saying about how they can stay irrational longer than you can stay solvent?

        • My thoughts exactly…. but I’ll get serious in Sept October – once the mortgage holiday is over, the full blown jobkeeper has flowed through the system and most of the population is vaccinated.

          Then there will be a no real reason for continued stimulus etc and we will be in a a post Covid normal world – sort of normal but not.

          What I am expecting in last quarter 2021 is higher levels of zombie business collapses, higher unemployment for Australians, a return to huge immigration for universities and the exploited labour that comes with them.

          I’d be interested in what other people think the end of the year will be like.

  2. All the building companies in my regional city are booked out for 2021. If you want something done you are getting told 2022.

    • innocent bystander

      but, but, the stimulus was because they had no work, you know economic downturn due to plague.

      in WA the state govt decided to have some homebuilder grants as well, even tho last year it was difficult to find a tradie or builder – completely insane.
      Relatively speaking I don’t mind living in Oz, but finding somewhere to live is impossible.

  3. I’d like to know in plain English what are the constraints to endless money printing. What’s stopping the Government printing $1 trillion this year then $2trillion next year then $3 trillion the following, endlessly throwing it at the property market to keep prices inflating. What stops them from doing this. Does anyone know.

    • Only two things I think would be fear of inflation if that money trickled out of assets and into consumables, and if Australia is swimming against the tide of global central bank or fiscal policy.

      Otherwise brrrrr goes the printer

      • A large increase in inflation is virtually impossible when the numbers are constantly being revised to the downside. By the time it becomes obvious, we will probably be in hyperinflation.

        • In which case why hold cash? Own means of production. TINA endless QE = euphoria melt up of last 6 months.

          If we were the only ones doing it Australia = Weimar republic. Bit were not, so no hyperinflation.

    • A crash in the value of your currency resulting in a large inflation spike as the price of petrol and other imports goes through the roof.

      • This doesn’t stop them. It is just a possible consequence. If you are prepared to wear it, continue printing away all through it.

        edit: Or to put it in plain english, there are no constraints, only possible or actual consequences. If they are happy for the consequences to occur they can print infinite money.

  4. Holiday In ScomodiaMEMBER

    And on April 2nd- we will get Tradie Keeper, Trade Supplier Delivery Driver Keeper, Skip Bin Guy Keeper… no-one left behind… oh, wait…

  5. michael francis

    Thanks for the responses. It’s definitely a hard one. Many commentators have been screaming Zimbabwe style hyperinflation for the last 10 years and it hasn’t happened.
    I don’t see a currency collapse because all Central Banks are doing it. All I see is asset price inflation as far as the eye can see making asset holders (baby boomers and the 1% richer).

    • The money printing has been constrained to assets via only printing via loans, predominantly to housing. Might want to check the trajectory of housing for the last 25 years before declaring it hasn’t happened. If they continue/expand the jobkeeper/whatever inject cash straight into the hands of the poor to spend, then expect inflation in consumer goods to pop it’s head up.

  6. After the previous economic downturn in 2014–2015. demand recovered only by 2019 (3.4 million transactions, which is comparable to 2014, when 3.5 million transactions were recorded). First of all, the demand for housing under construction has increased, largely due to the implementation in 2015–2016. anti-crisis program of preferential mortgage lending for buyers of new buildings. Most notably, in the last two years, when mortgage rates began to decline despite relatively stable nominal prices and incomes (from 13.5% in 2015 to 10% in 2019).

    Real demand for housing depends not only on the current income of the population, prices and conditions of mortgage lending, but also on people’s expectations. Today, the limiting factor is precisely the income of citizens and the expectation of their change, or rather, preservation. The level of mortgage rates does not play, in my opinion, in the current conditions of significant importance.

    Based on https://fluix.io/industry-construction