Australia’s build boom could end in 2022 as lack of migrants bites

The record volume of new detached homes under construction is occurring in all regions and is continuing to expand, HIA found, but flagged the importance of population growth to ongoing success.

“Recent data suggests that demand for detached housing remains solid even without fiscal stimulus,” said HIA economist Angela Lillicrap.

“A return to stable and reliable growth in population is necessary to ensure economic growth,” she cautioned.

On the upside, HIA found encouraging signs that demand for multi-units is returning ahead of population growth, with approvals for units on the rise across NSW and Queensland after a pause in 2020.

According to Ms Lillicrap, this pickup in interest for units is a direct result of investors looking through the haze of the pandemic and anticipating a return of migration.

However, Ms Lillicrap did issue a stark warning, noting that despite the strong outlook for the next 12 months, without a return overseas migration, growth could be curbed and fast.

“There will be a decline in new home commencements over the next few years,” she said.

“Even with overseas migration restarting next year, the volume of new home commencements will not be sustained. A decline in commencements of new homes should be anticipated from mid-2022 when homes initiated by HomeBuilder are reaching completion.”

Ms Lillicrap also flagged possibly material, labour and land shortages as the elevated level of building yields demand for key building inputs outstripping supply.

“The delay in the supply of materials will see the impact on labour and ancillary services remain elevated well into the second half of 2022. This is a positive for the wider economy as the economic stimulus is spread over more years, but a challenge for building businesses,” she noted.

Looking also into renovations and their popularity as a result of COVID-induced changes, Ms Lillicrap noted that the reno market is midway through a record year.

“Unlike detached home building, we expect that this trend will continue for a number of years due to the elevated savings and increased time spent at home,” she confirmed.