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The latest data on Building Activity released by the Australian Bureau of Statistics (ABS) has revealed the total number of dwelling units commencing construction fell by 4.4 per cent to 41,911 dwellings during the December quarter 2024 (seasonally adjusted).
This was comprised of a 6.1 per cent fall (to 26,136) in new private sector house commencements from the September quarter 2024 to December and a 5.6 per cent fall in new private sector other residential commencements, totalling 14,196 after a 6.3 per cent rise in the previous quarter.
However, the annual change in new commencements rose for total dwellings, up by 5.3 per cent on the December quarter 2023, driven by an increase in new private sector houses of 8.7 per cent.
Additionally, new dwellings completed rose 0.4 per cent quarter on quarter to 45,167, with new private sector other residential completions rising by 9.4 per cent to 16,675 and a slight drop in new private sector house completions of 2.2 per cent to 27,757.
According to the ABS, the total value of building work done fell 0.7 per cent to $38.4 billion during the quarter, driven by non-residential building with a fall of 2.9 per cent to $14.7 billion, following a decrease of 1.9 per cent during the September quarter.
Meanwhile, work done on new residential building increased by 0.6 per cent to $20.3 billion, 5.7 per cent higher for the year.
Over the year, there were 168,050 new homes that commenced construction, remaining at the “lowest levels in over a decade” according to HIA chief economist Tim Reardon.
“Home building is currently at the bottom of a cycle and is losing skilled workers to other industry sectors, which impedes future building capacity,” Reardon said.
“Australia has consistently built more than 200,000 homes each year and will need to exceed 250,000 annually to meet the Australian government’s 1.2 million homes target.
“Despite the low volume of new homes commencing construction, demand for skilled tradespeople remains high, just not in the new home building sector. The exceptionally low rate of unemployment, and their rare skills, see them in high demand from other industry sectors.”
Reardon said that Australia’s “exceptionally low level of unemployment” has acted as a “double-edged sword for the industry” due to it creating demand for new homes while leading to higher labour costs to build a new home.
“The more workers that are lost from the home building sector in this cycle, the harder and more expensive it will be to increase that capacity, as interest rates fall and activity picks up.”
According to Reardon, the only measure that an incoming government can do to increase supply in the short term is to “offset the cost of taxes, fees and charges, by providing financial support for those that build a new home”.
He said that this can be done by removing “imposts” such as LMI or first home buyers from established markets and incentivising them to build a new home.
“These are the ‘easy-good’ solutions to the housing shortage,” Reardon said
“This doesn’t negate the need for the ‘hard-smart’ policies tackling land supply, infrastructure costs, planning regimes and delays to home building and reform of taxes on new homes.”
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