Drop in building starts not a sign of slowing market — expert

The number of homes that started construction over the September quarter last year remained healthy despite the lockdowns in the biggest cities.

Figures from the Australian Bureau of Statistics showed that over the September quarter, total dwelling commencements fell by 16.3%.

Housing Industry Association (HIA) economist Thomas Devitt said the lockdowns in Sydney and Melbourne resulted in a sharp contraction in new detached home starts in the September quarter.

“The decline in new home commencements in the September quarter was not a reflection of a slowing market, with other indicators, such as building approvals, showing a continued strong pipeline,” he said.

Almost 36,000 houses commenced construction over the quarter.

“Despite the decline, this is still stronger than any quarter before the mid-2020 introduction of the HomeBuilder grant,” Mr Devitt said.

“This puts detached house commencements over the last 12 months at 149,345, a new record high and 12.8% above the pre-HomeBuilder record of 132,377 in 1988-89.”

On top of this, there were also over 20,500 units that began construction in the quarter.

Despite a quarterly decline, multi-unit commencements were still up by 11.7% over the year.

Mr Devitt said the current constraint on home building is not demand but the availability of land, labour and materials.

“The shortage of labour and materials has led to construction timeframes increasing significantly,” he said.

“Under normal circumstances, the surge of HomeBuilder projects would have translated into an increase in completions from the June 2021 quarter — however, completions have been slower to respond.”

“As a result, the volume of approved-but-not-yet-commenced work is at its highest level in over a decade.”

All states and territories reported declines in new house commencements, with Northern Territory striking the biggest drop at 65.5%, followed by Western Australia 28%, Queensland (24.6%), and Tasmania (24.2%).

The rest of the states had declines of around 8% to 12%.

Meanwhile, some states reported gains in multi-unit commencements during the quarter, with Tasmania reporting a whopping 240% growth, followed by Western Australia (37.2%), and Victoria (17%).

The Northern Territory also reported the most substantial drop in multi-unit starts at 46.7%, followed by the Australian Capital Territory (42.4%).

Queensland, South Australia, and New South Wales also registered significant declines in unit starts, at around 35%.

Mr Devitt said the construction is still on a boom despite an overall decline in building commencement, supported by the record low interest rates and the pandemic pushing households towards lower density living.

“Strong employment conditions, rising house prices and consumer confidence are also continuing to support housing demand,” he said.

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Photo by @d_mccullough on Unsplash.