Australia’s residential construction sector recorded its fourth consecutive quarterly decline in building commencements in June — despite this, however, starts are still higher than before the pandemic.

Latest data from Australian Bureau of Statistics show a 2.7% drop in total dwelling commencement to 48,078 dwellings. This included a 3.1% decline in medium- and high-density home starts and a 0.2% drop in detached home commencements.

Master Builders Australia CEO Denita Wawn said while the volume of new detached house starts is still higher now than it was in the lead up to the pandemic, the results were not surprising given the phasing out of exceptional fiscal and monetary stimulus propelling new home building starts.

“Despite the volume of new home starts dropping over the past year, there were still over 240,000 new homes under construction at the end of June,” she said.

“This is higher than ever before and is related to the supply bottlenecks in the building pipeline which are slowing the pace at which new homes can be built.”

Over the next three years, Ms Wawn said new home building starts could potentially fall under 200,000 per year and the volume of output needed to meet the demand will not be exceeded until 2026.

“Our 2022-26 residential forecasts predict a bumpy road with a downturn over the next few years. Forecasts will trend upwards as inward migration and interest rates stabilise, and pent-up demand shifts the dial,” she said.

Ms Wawn said the building and construction industry continues to be frustrated with lengthy delays in approvals for land title, building applications, and occupation certificates.

“Shortage of land in the right places, high developer charges, and inflexible planning laws also restrict opportunities to meet the housing needs of our future,” she said.

Housing Industry Association (HIA) economist Tim Devitt said supply constraints are delaying project completions.

“There were only 28,898 detached houses completed in the June quarter, 6.3% down from the previous quarter,” he said.

In comparison, there were 30,926 new detached houses that commenced construction during the quarter.

With more houses still being commenced than completed, Australian home builders now have 104,228 detached houses under construction, a record pipeline that is 81.2% larger than what existed pre-pandemic.

“Supply constraints are continuing to hold back completion of these projects. Materials constraints have plagued builders over the last two years, and shortages of skilled trades have only become more acute,” Mr Devitt said.

“These supply constraints will keep Australia’s home builders busy this year and next as they continue to work down this record volume of detached house projects.”

Mr Devitt believes that with the continued rise in interest rates and construction costs, affordability will worsen and push potential buyers towards the more accessible higher density living.

“On top of this, with the return of migration, demand for units should continue to strengthen,” he said.

“This increasing activity in the multi-units market, combined with ongoing activity in the detached market, will sustain elevated demands for skilled trades and obscure the effects of increasing interest rates on the broader economy.”

Photo by kanchanachitkhamma on Canva.