Follow this number and weep.
240,000.
That's the number to keep your eye on this year. That's the required run rate to hit the Labor governments “ambitious” target of building 1.2 million newhomes over the next five years.
Remember that this ambitious target used to be 1m homes. But then everyone realised that that wasn't going to be quite enough.
I'm not even sure at 1.2 million would be enough to ease Australia’s chronic housing shortage.
But that doesn't matter. Because we're not going to hit that target. We're not even going to come close.
1.2 million over five years works out at 240,000 homes a year.
But on industry projections, it looks like we'll be lucky to do even two-thirds of that this year.
The Housing Industry Association’s (HIA) chief economist, Tim Reardon, expects approvals for detached homes to keep falling during the first half of 2024:
“The low volume of building approvals throughout 2023 will see the volume of homes commencing construction continue to slow this year”, Reardon said via media release.
“Other leading indicators of activity in the housing market, such as new home sales and housing finance data, are also consistent with their confirmation of this projected slowdown”.
“A continued fall in the number of new homes approved indicates a slow start to the Australian government’s ambition to build 1.2 million new homes in five years starting mid-2024”, concluded Mr Reardon.
Master Builders Australia (MBA) expects about 170,000 new home to be built in 2023-24.
“Today’s figures mean that just 945,554 new homes have been approved across Australia over the past five years”, MBA chief economist Shane Garrett said via media release.
“Master Builders has forecast that 2023-24 will see around 170,100 new homes built, well below the 240,000 needed per year to meet the 1.2 million housing accord targets”, he said.
A big problem is costs. MBA Deputy CEO, Shaun Schmitke, also raised alarm that rental and new home inflation continues to rise.
“New dwelling costs have also intensified, having risen by 5.5% over the past year”.
That's better than what it was, but prices haven't fallen, and they're still growing at twice the pace they were pre-covid.
This is why analysts like Jarden economist Carlos Cacho believe the Albanese government’s 1.2 million homes target over five years is delusional, citing barriers such as the 30% rise in construction costs and the 30% reduction in borrowing capacity.
“Despite housing prices picking up again, despite the chronic undersupply of housing, you haven’t seen a pick-up of sales,” he said. “On our numbers, we expect housing starts in calendar year 2024 to slow to about 155,000, which would be the lowest since 2012”, Cacho said.
“Something doesn’t seem to stack up. While new supply is badly needed, higher interest rates and construction cost means many potential buyers cannot afford new housing. Including land, we estimate new house costs are up 26 per cent since December 2019”.
The upshot is that there's just no way we're building our way out of this housing shortage anytime soon.
And so prices will just keep rising.
JG.
Carl Hussell says
The root cause is the delay in planning approval for new development, and in Victoria, Labour windfall tax of 50% on rezoning adds to huge cost increases for land.