Home building sector confidence to increase over 2024: HIA
With a positive economic climate priming Australia for an increase in home building over the year, an industry expert has argued excessive taxes could inhibit this growth.
The Housing Industry Association (HIA) has released its Economic and Industry Outlook report, offering an insight into new home building and renovations activity nationally and within the eight states and territories.
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HIA chief economist Tim Reardon highlighted that “most housing markets appear to have reached or passed the trough in home building by mid-2024, following the fastest increase in the cash rate in a generation”.
“States with good employment opportunities and relatively more affordable land are leading the charge,” he explained.
Citing that nine months have passed since the Reserve Bank of Australia’s last rate rise, the chief economist shared “market confidence is returning” and that only the “heavily taxed markets of NSW and Victoria have yet to see a trough in detached home building in 2024”.
Reardon relayed “Western Australia, Queensland and South Australia appear to be past the trough in their cycles” and detailed that the increasing number of contracts being signed for the construction of new homes since the start of the year has resulted in a “new wave of projects commencing construction”.
Within the two larger capital cities, the chief economist stated “this improvement in home building activity is not evident in New South Wales and Victoria”, where “new tax imposts continue to impair home building”.
“Government policies continue to inflate the costs of land and construction in New South Wales and Victoria. Policy changes are also adding to market uncertainty delaying a return of investment into new home building and exacerbating the shortage of housing.”
Nonetheless, Reardon said “Australia’s economic fundamentals have remained resilient to the rise in interest rate”, and emphasised “unemployment remains exceptionally low, the economy stable and population growth strong”.
“Productivity in the sector is improving rapidly as the adverse impact of border closures and policy disruptions are replaced with more stable conditions.”
The chief economist further noted that “material price rises are back to pre-pandemic levels and labour shortages have eased to some extent” as “activity levels decline”.
“These factors are setting the scene for an increase in home building later this year as confidence is restored,” said Reardon.
Even with these conditions resulting in supply slowly returning to the home market amid the acute housing shortage, the chief economist stressed that “Australia could be seeing far greater home building volumes”.
“This increase in new home commencements could be accelerated if governments remove the market failures, tax imposts and constraints on the industry, or at least stop increasing housing taxes,” he concluded.