The last 18 months has been terrible for Australia’s home building industry with scores of builders collapsing amid soaring construction and financing costs.
In the 2022-23 financial year, construction insolvencies soared by 72% to 2211, according to Australian Securities and Investments Commission (ASIC) data.
It’s never been this bad”, said Builders Collective of Australia president Phil Dwyer, who believes builders are facing their biggest crisis in at least 40 years.
“Even when we go back to the ‘60s, ‘70s ‘80s and so on, when we used to have a recession every six or seven years, we never saw this sort of fallout from the industry”, he said.
Thankfully, conditions are beginning to improve for home builders.
On Tuesday, the Australian Bureau of Statistics (ABS) reported that trend dwelling approvals rebounded by 1.6% between April and June:
Separate ABS data showed that the number of loans for the construction of new dwellings rose by 6% in June; albeit from record low levels:
The June quarter consumer price index (CPI), released last week, also showed that the growth in new dwelling prices is falling sharply reflecting “lower new demand, improvements in the supply of materials and material costs easing”:
Given the Reserve Bank of Australia (RBA) is near the top of its interest rate tightening cycle, conditions should continue to improve for home builders; albeit from a very poor starting point.
It needs to given housing construction rates have fallen at the same time as Australia is experiencing record immigration-driven population growth:
Australia needs to supply an extra 329 homes per day (net of demolitions) just to house the 1.5 million net overseas migrants projected to arrive over the five years to 2026-27.
Australia, therefore, must deliver the biggest housing construction boom in its history if it is to house the record number of migrants arriving.
Otherwise, rents will continue to soar and many thousands of Australians will be forced into group housing and/or homelessness.
Meeting the above supply target would be unfeasible even with perfect housing conditions, let alone the current unfavourable circumstances.
The only viable answer to Australia’s housing crisis is to reduce net overseas migration to a level commensurate with the country’s ability to supply housing and infrastructure.
The historical level of roughly 100,000 net overseas migration per year would be a sensible target for policy makers.
