The latest housing construction data from the Australian Bureau of Statistics (ABS) shows that nearly 240,000 homes were under construction in the December quarter, which was close to a record high:
The reason for the huge number of unfinished homes are two-fold:
- The Morrison Government’s HomeBuilder stimulus brought forward demand, resulting in a rush of buyers signing contracts to build;
- Builders were then caught out by soaring construction costs, materials delays, and labour shortages, extending the average build time.
The next chart, which plotting dwelling approvals/commencements against completions illustrates the delays in build times:
Historically, dwellings have been completed several quarters after they are commenced. However, over the pandemic there has been no lift in completions, despite the boom in commencements, as highlighted by the red circle above.
The end result is the pile up of half-built homes across the nation, which is being made worse by the wave of collapses across the industry (e.g. Porter Davis Homes).
Because of these delays, Australian builders will remain busy for the remainder of 2023 and possibly into 2024 as the construction pipeline is run down.
Beyond that, the situation facing builders is precarious.
As illustrated in the chart directly above, dwelling approvals have fallen sharply, signalling falling buyer demand.
Moreover, finance commitments for the construction of new homes collapsed to their lowest level on record in February:
In a similar vein, new home sales in the three months to February were 46.8% lower than at the same time the previous year:
Therefore, the demand for new homes has collapsed, which means that work for home builders will evaporate next year after the current pipeline of homes under construction are finished.
It also means that Australian tenants will continue to struggle to find accommodation in the face of record migrant inflows.
Dwindling housing supply and rising immigration demand is a dangerous combination that inevitably means that rents will continue to soar and more Australians will become homeless.
