The Australian Bureau of Statistics (ABS) yesterday released Building Activity data for the December quarter of 2020, which revealed a big 18.6% rise in dwelling commencements over the quarter driven by a 27.0% surge in detached house commencements:
By comparison, unit & apartment commencements rose by only 4.6% over the quarter and are tracking close to 8-year lows.
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The surge in dwelling commencements was driven by WA (+94.1%) and QLD (+27.5%); although all major markets recorded rises over the December quarter:
According to the Housing Industry Association (HIA), “the number of new houses that commenced construction in the December quarter was the second highest level on record” on the back of the HomeBuilder subsidy:
“House commencements surged by 27.0 per cent in the final quarter of 2020 to their highest level since March 2000,” added Mr Reardon.
“This record level of investment in new home building occurred six months after the announcement of the HomeBuilder program. The increase in commencements occurred across all jurisdictions”.
The HIA also forecast that “commencements will reach a new peak in mid-2021”.
The HIA is right. Dwelling commencements always lag approvals, and detached house approvals in February 2021 registered their highest monthly count since the series began in 1983:
These dynamics help to explain why tradies are run off their feet as evidenced by job vacancies across the construction industry hitting a record high 26,700 over the February quarter, according to the ABS:
HomeBuilder has certainly succeeded in pulling forward construction at a time when household formation has collapsed on the back of the closure of Australia’s international border to immigration.
This inevitably raises concern that construction will collapse once the HomeBuilder pipeline finishes.