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The NAB Residential Property Survey Q1 2023 identified that construction costs are the leading constraint on housing development in NSW, Queensland, and Western Australia, while being considered to be a “very” significant constraint in Australia overall.
The survey also indicated that rising interest rates are now being considered a “very” significant restraint on new housing development in Australia, particularly in Victoria, where it is the largest constraint overall.
In addition, the lack of development sites, particularly in NSW and South Australia have also impacted new housing developments.
The survey further indicated that the sustainability of house price gains continued to have the least negative impact on new housing developments during this quarter.
Constraints on the established housing market
Rising interest rates was also apparent in the established housing market, becoming an “ever-bigger (and growing)” constraint for buyers of existing property across Australia.
Increasing interest rates were also identified as the biggest constraint for home buyers in all states, excluding Western Australia where lack of stock was proving to have the biggest impact on buyers.
According to the major bank, property professionals have highlighted that tight credit will be the “next biggest hurdle” for property development nationally, proving to be especially problematic in South Australia and Victoria when compared to the other states and territories.
Access to credit was also a hurdle for buyers, being considered “significant” in all states except for Western Australia, and most challenging for buyers in NSW and Victoria.
Furthermore, price levels and lack of stock had a larger influence over buyers in Q1, being seen as a “significant” constraint for buyers, especially in South and Western Australia.
Having the least influence on buyers across the country was employment security and returns from other investments, with their impact only being considered as “somewhat” significant.
NHFIC report on construction constraints
The NHFIC State of the Nation’s Housing 2022–23 report explained that the rapid return of population growth coinciding with the fastest increase in interest rates for several decades is “undermining residential construction feasibilities and weakening the pipeline of new housing”.
“Strong demand for housing coupled with tight supply of both labour and materials, and bad weather has put significant pressure on the construction industry,” the report noted.
[RELATED: Housing shortfall expected to worsen: NHFIC]
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