‘Record high’ housing construction in September: ABS

The total number of dwellings under construction reached record highs in the quarter ending September 2022 (Q3/22), according to the latest building activity data from the Australian Bureau of Statistics (ABS).

According to the ABS, dwellings under construction reached a new record of 244,479 in September, an additional 0.6 per cent increase from the record in June of 243,078.

The new stats continue the record-breaking trend for dwelling construction, which started in December 2021.

The value of building work done also rose over the period*, hiking 1.5 per cent to $30.6 billion, the ABS has documented.

The increase was driven by new residential building work done, which rose 2.1 per cent to $15.4 billion and followed a fall of 6.5 per cent in the June quarter, it outlined.

Conversely, non-residential building work done rose 2.3 per cent to $12.6 billion, while work done on new houses rose 1.2 per cent to $9.1 billion. New ‘other residential’ building rose 3.3 per cent to $6.3 billion, the ABS data revealed.

Private sector new houses have been increasing to record highs ever since March 2021, with 103,124 new private houses under construction in September 2022, the ABS noted.

However, while the construction numbers have reached new highs overall, commencements have fallen.

In seasonally adjusted terms for the period, the total dwelling commencements fell 5.2 per cent to 45,489.

New private sector house commencements fell 4.9 per cent to 28,895 and new private sector ‘other residential’ commencements fell 5.2 per cent to 15,618 dwellings.

This could partly be explained by the fact that there had been escalating construction costs and five cash rate increases in the period to September 2022.

The fall was driven by private sector ‘other residential’ dwellings, which fell 5.2 per cent to 15,618 and followed a fall of 4.5 per cent in the June quarter, it explained.

Private sector house commencements fell 4.9 per cent to 28,895 dwellings and followed a fall of 1.0 per cent in the June quarter, the statistics show. 

Labour shortages and slow home building

Commenting in response to the latest ABS data, Housing Industry Association (HIA) senior economist Tom Devitt said Australia’s home builders had been commencing more new projects than they had been completing for over two years now. 

“This [September quarter 2022] data provides estimates of the value of building work and number of dwellings commenced, completed and under construction, across Australia and its states and territories,” Mr Devitt stated.

“There were only 29,153 detached houses completed in the September Quarter 2022, just 2.5 per cent up on the same time the previous year.

“The number of homes reaching completion remains no higher than those being commenced with 29,177 new projects started in the September quarter.

“Supply constraints were holding back completion of these projects.

“Materials constraints have plagued builders over the last two years, but the shortage of skilled trades is the number one constraint on Australian builders,” he said.

Mr Devitt warned that over 104,000 houses are still under construction across Australia, almost double the pipeline that existed in mid-2020.

He said new house commencements are expected to continue to decline into 2024.

Multi-unit dwellings in spotlight

“The volume of houses under construction is expected to keep Australia’s home builders busy this year, despite the slowdown in the number of homes expected to commence construction,” Mr Devitt continued.

“In addition to this, the volume of multi-unit dwellings under construction continues to grow as commencements exceeded completions over the 18 months to September 2022.

“The multi-units’ sector should continue to be supported by the return of overseas migrants, students and tourists and the incredibly tight rental markets across the country," the economist continued.

“With interest rates increasing rapidly, affordability constraints will push home buyers back towards more affordable, higher density living.

“This large volume of work under construction at the end of 2022 will ensure elevated demand for skilled trades across the economy.”

*The data is based on a response rate of approximately 85 per cent of the value of building work done during the quarter, which was lower than usual. As such the ABS has said that final data for this quarter is not expected to be released until April 2023.

[Related: RBA hikes cause decline in building approvals: HIA]