Australia’s housing supply is already a mess, with dwelling approvals, commencements, and completions all tracking at near decade lows in annual terms at the same time as the nation’s population is growing like an out-of-control science experiment:
As a result, Australia is experiencing a record shortfall between population demand and supply, which is the primary driver of the nation’s current rental crisis.
Major plumbing and bathroom products supplier Reece forecasts that Australia’s housing construction will weaken further over the next 12 to 18 months, further compromising the Albanese government’s target to build 1.2 million homes over five years.
“In terms of where we’re seeing it now, there’s definitely softness in housing, and we are also seeing softness in the renovation space as well”, Reece CEO Peter Wilson told analysts on Monday after releasing the company’s financial results.
“We are definitely preparing for at least the next 12 months to be in a softer period, it could even be a bit longer”.
“All of the lead indicators are definitely showing further signs of softening”, he said.
Wilson said he did not expect a recovery until after the RBA cut interest rates.
“If interest rates do change, that will signal a point where the psychology might start to change”, he said.
Wilson’s assessment of the supply situation is fair. The reality is that the macroeconomic conditions are currently stacked against home building, namely:
- Interest rates are high, crimping demand for new homes and builder finances.
- Construction costs have soared by more than 40% since the start of the pandemic, making the construction of new homes too expensive.
- Nearly 3,000 construction companies collapsed in the past financial year.
- Home builders are competing for labour and materials with government ‘big build’ infrastructure projects.
These headwinds have combined to destroy Labor’s fanciful target of building 1.2 million homes over five years—a target that has never been achieved before.
It also means that unless the federal government dramatically cuts population demand via net overseas migration, Australia’s housing shortage will continue to worsen.
