Pandemic drives “super cycle” of housing demand

Sales of new detached houses is at levels previously only observed when there is direct government stimulus, according to new home sales data from the Housing Industry Association:

“Sales of new detached homes increased by a further 11.3 per cent in December,” stated HIA Economist Tom Devitt.

The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is a leading indicator of future detached home construction.

“The increase in sales in December marks the fifth consecutive monthly increase in new home sales, a full nine months since the end of HomeBuilder,” added Mr Devitt.

“This is the highest level of new home sales since 2011, excluding the three largest spikes associated with HomeBuilder.

“Sales in the final quarter of 2021 were also 25.5 per cent higher than the previous quarter.

“Underlying demand for housing remains exceptionally strong as the pandemic continues to push households toward lower density living. It appears that the more time people spend under lockdown and working from home, the higher is the demand for detached housing and renovations activity.

“These factors are driving a ‘super cycle’ of housing demand across Australia…

“As a result, the volume of approved-but-not-yet-commenced work is at its highest level in over a decade,” concluded Mr Devitt.

The gigantic dwelling construction pipeline is illustrated in the below chart, which shows a gaping gap between dwellings approved and commenced versus homes completed:

This suggests that a flood of new housing supply should hit the market over the course of 2022.

Charts for each of the major jurisdictions are provided here.

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