Australia’s residential construction sector remain busier than usual as housing demand continues to surge on the back of government-led support and favourable market conditions.
Cameron Kusher (REA Group executive manager, economic analysis) stated that dwelling constructions are continuing to rise, as well as completions and commencements.
“Over the past year, we have seen an unprecedented level of demand for new housing right across Australia for a number of reasons,” he said.
“The data we’re focusing on looks at commencements, completions and currently under construction, and they tell us a lot about what is likely to happen in coming months.”
Record breaking housing starts
According to the Australian Bureau of Statistics, there was a 23.2% rise in dwellings built.
This quarter saw 41 276 new homes being built. This is the highest number ever recorded. This represents an increase in construction of 13%.
This quarter saw an increase of 46% in unit starts to 22,974
This was the largest increase of unit starts since September 2018.
“This data highlights that demand for new homes remains strong and the surging demand initially on the back of the HomeBuilder grant has created a substantial pipeline of dwelling construction, particularly for houses,” Mr Kusher said.
Trending higher in ongoing building
Australia had 211 686 new homes as of the end the second quarter.
This quarter saw the largest number of constructions in 2019 but was 8.6% below the historic peak.
Surprisingly though, the number houses under construction increased 16.8% in the quarter, reaching an historic high.
On the other hand, even though the unit market saw a 2.8% increase in ongoing construction activity, it was 23.4% less than its peak.
“The quarterly release also revealed that the typical length of time from commencement to completion for a house nationally was 2.23 quarters for houses, 3.45 quarters for townhouses and 8.2 quarters for units,” Mr Kusher said.
“Given this, we can expect high house completions over the coming quarters and if completions begin to slow, the pipeline will slow quickly.”
For dwelling completions, historic peaks are in decline
According to the National Housing Federation, 1.5% was the highest quarterly increase in dwellings constructed.
Housing was the major component of the overall figure with a 5.8% rise in housing completions to offset the 3.4% decreases in unit completions.
Both segments are however now at a lower level than their historic peaks.
“With a solid pipeline of newly commenced properties and a high volume of stock under construction. I would expect that over the coming quarters the number of dwelling completions, and particularly new house completions, should rise,” Mr Kusher said.
Future construction activity
Kusher stated that there would be steady completions in the months ahead due to an increase in supply of higher-density materials.
“But assuming commencements continue to rise, the volume of units under construction should remain heightened and potentially push higher,” he said.
Kusher explained that these gains can be attributed to the government’s stimulus plan for building new homes. But, the question remains: What happens if the stimulus’s benefits fade?
“The re-opening of the international border should create some more demand for new housing from non-citizens and there is potentially an uptick in new construction in some non-capital city areas where housing demand has spiked,” he said.
“Nevertheless, the past year has seen unprecedented demand for new housing, and it is likely that it has now peaked which is likely to result in fewer commencements and completions going forward from here.”