HomeBuilder saw a surge in detached housing approvals yet little change in attached dwelling applications.
Rising costs, labour shortages alongside fixed price contacts has stuffed up a lot of building businesses, with many facing the wall.
Some major construction firms are now thinking of pulling out of the residential sector altogether.
Working for the practice isn’t fun for anyone and even when there is a profit it is increasingly negligible making it hardly worth the risk.
Once again government largesse; and the RBA’s overreach; were largely blame for these blowouts.
And as one might expect, overly aggressive interest rate hikes are now having the opposite impact, rapidly reducing the demand for new dwellings.
Whilst there are quite a few new dwellings in the construction pipeline, some buyers are now saying they will not be able to settle, causing further angst for the home builders and developers exposed. See charts 1 and 2.
In addition, things also aren’t looking that rosy when it comes to the banking industry. Even if we have seen the end of local interest rate hikes – which I think we have – it will be harder from most to get a home loan given the rising financial insecurity abroad.
Yet all states and territories – with the exception of Victoria and the ACT – aren’t building enough new dwellings to cater for underlying demand. See charts 3 and 4.
Table 1 shows that this under build rate is 18% across the nation, which means that over the past year we approved some 187,000 new dwellings but we needed 220,000 or 33,000 more.
Some locations are woefully undercooked when it comes to new housing.
And this is before we have factored in the big uptick upwards in net overseas migration. But more on that topic next week.
Adding further pressure is the rising costs to build a new dwelling, which now averages $415,000 across Australia.
This cost excludes the land, it is just the gross building cost. And such costs have risen by 17% over the past twelve months. See charts 5 and 6.
History shows that building costs, on average, have risen by 4.3% per annum over the past decade. And looking back to the early 1980s, there are very few occasions – and all of them short lived – where housing construction costs actually fell.
Therefore, it looks like high building costs are here to stay.
So where does that leave us?
In short, up shite creek without a paddle.
Well, almost, there are paddles but they realistically remain out of reach.
I think it needs to get a whole lot worse – think rising rents; increasing homelessness; adult children with kids moving back into with their ageing parents; more builder bankruptcies; and eventually rising construction-related unemployment – before the government and the relevant powerbrokers actually do something about it.
For mine, the next federal election and state elections in coming years will be won or lost over this issue.
And when we finally wake up to ourselves, we will need to build more alternate housing stock. Gone, again for mine, is the dominance of the traditional detached house when it comes to new builds. See table 2 and the Missing Middle image below.
Oh, and as a footnote, we don’t need thought bubbles here – like say rental caps – nor do we need a series of housing summits, but practical solutions and implementable actions.
The need for a second housing summit – in Queensland’s case next week – speak volumes.
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