Construction of new homes set to drop by nearly half, says HIA
Experts are bracing for a massive drop in activity in the housing sector, with construction of new dwellings expected to fall nationally by 43%, according to the Housing Industry Association (HIA).
This would put the number of new homes being worked on next financial year at 112,000 – down from nearly 200,000 in FY19.
In NSW, the shock is predicted to be even greater. The HIA report estimates housing starts will drop by 27.5% this financial year and a further 34% in FY21.
HIA regional director David Bare said the coronavirus pandemic has caused fissures all throughout the residential building industry and recovery is not expected for another two years.
“New South Wales was already in a vulnerable position, with the housing market cooling over the last few years and a significant amount of apartment supply still to come online,” he said.
Travel restrictions currently in place are also a cause for concern, especially in major cities like Sydney and Melbourne where net overseas migration accounts for the majority of population growth.
"The further shock to housing demand from the loss of foreign students, tourists and migrants - who are particularly valuable to the state - is a particularly worrying development,” Bare said.
"The 625,000 overseas students enrolled in Australian education institutions equates to demand for the past two years of apartment construction. It is not clear how many of these left in March or how many will return.”
Shot in the arm necessary for construction
The current crisis has triggered a dramatic response from the Federal Government, but according to the Property Council of Australia, more needs to be done to restore confidence in the building industry.
Today, the industry body released a seven-point plan to incentivise construction. Among the proposals is a ‘New Home Boost’ scheme, a $50,000 grant offered to purchasers of newly built homes.
Chief executive of the Property Council, Ken Morrison said “some big and bold thinking” is necessary to kickstart the economy and a revitalised property market will play an essential role.
“As Australia’s biggest employer which contributes over 13% of GDP, the property industry can be a powerhouse behind economic recovery and growth with the right policy settings and market incentives from the federal, state and territory governments,” he said.
According to the Property Council, the scheme will stimulate the construction of 50,000 new dwellings and create more than 200,000 jobs.
The council also recommends a ‘Welcome to Australia’ migration plan to attract “the skills, people and population growth” the economy needs.
It would involve a major advertising campaign to promote Australia as a safe and healthy country to study and work in, and incentivise permanent migration by temporarily lowering the points system for permanent skilled migration classes.
Policies like these could help soften the impact of the pandemic in the coming years and put the housing construction sector on more solid footing.
Citing data from the Australian Bureau of Statistics, the council says every $1 poured into residential construction generates $3 of activity across the broader economy, making it “one of the most powerful job keepers and job multipliers.”
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