Australia could fall short of 1.2m new build target

Currently, Australia is set to commence construction on a little over 1 million new homes over the next five years – almost 200,000 short of the Australian government’s target, according to HIA senior economist, Tom Devitt.

He said that while it is possible to build the 1.2 million new homes over five years, it will require significant policy reforms, including lowering taxes on home building, easing pressures on construction costs, and decreasing land costs.

While Mr Devitt does expect recovery from recent decade lows across both detached housing and multiunit markets, he does note that there are some headwinds, including the uncertainty around cash rate cuts and “increasingly sticky” inflation.

And though the recovery in home building isn’t reliant on a cut to the cash rate, he did warn that expectations around recovery will “nonetheless, be insufficient to meet government housing targets as long as home building continues to be constrained by punitive taxes and regulations”.

Mr Devitt said the punitive tax surcharges on foreign investors are squeezing out precisely the investment needed to help meet government housing targets.

On top of this, he stated that the recent changes to building codes are likely to add tens of thousands of dollars to the cost of building new homes.

The economist also argued that more effort is needed to “increase the capacity of the industry”.

This includes access to skilled labour, training and upskilling the existing workforce, and more support for apprenticeships.

He concluded that reforms in the areas would be a “material upside risk to this housing outlook”, which could see Australia reach above the government’s 1.2 million target.