Detached home construction to reach record high in 2021

According to HIA’s chief economist, Tim Reardon, every location in Australia is expected to witness a rise in new builds thanks to HomeBuilder.

“HomeBuilder has delivered. All leading indicators show a record volume of detached homes about to commence construction, and this is occurring in almost every location across Australia.

“This has not only secured the employment of the 500,000 people employed in detached home construction, it will also absorb tens of thousands of workers from across the rest of the economy,” Mr Reardon said.

But, besides HomeBuilder, a demographic shift is also driving demand for detached homes, the economist highlighted.

Across most states and territories, regional locations are showing a larger increase in activity compared with capital cities, as more people opt out of inner-city living.

“The strong conditions for detached homes are in stark contrast to the outlook for multi-units, which will continue to cool.”

The decline in overseas migration over the past year also played a role in the fall of the multi-unit sector and the number of new unit starts.

In contrast, the detached housing sector has yet to feel the impact of the population shift.

According to the report, first home buyers are among the primary sources of demand for detached housing as they now account for 43 per cent of new home loans.

This demand will continue into 2022 as the population continues to shift and investors return to the market.

However, the boom in detached home building may not carry on, Mr Reardon said.

“This boom in detached home building will not continue. The record year has been facilitated by HomeBuilder, low interest rates and a significant shift in population.

“We anticipate that all of these trends will move against home building in 2023 along with the impact of the loss of overseas migration,” according to the economist.

Building challenges

Looking ahead, the availability of residential land may prove to be a constraint.

According to Mr Reardon, land development has slowed in 2020 when COVID-19 brought about several restrictions for safety. As a result, the number of homes that start construction in the new year could be limited.

Further, trades shifting from apartment construction to detached home building, as well as the increased demand for building products, may also affect production.

“Skilled trades will be in high demand, but the slump in apartment construction will see these trades shift to detached home building.

“The supply chain of building products will be stretched, but many building components are manufactured in Australia, including cement, bricks, plasterboard and timber.”

On the bright side, “the increase in manufacture of these building components will also create employment”, Mr Reardon concluded.