Login
ISCOVER
After having hit a record low in September, building commencements are slowly ticking back up again, but brokers are still seeing headwinds for borrowers.
New figures from the Australian Bureau of Statistics have revealed that the number of properties being constructed has continued to rise slowly, but new building activity is still well below long-term averages.
The new release of data, which covers the March 2024 quarter, shows that total dwelling commencements rose 0.5 per cent to 39,715 dwellings (in seasonally adjusted terms).
While this small increase is up on the December quarter, commencement activity is still down 13.5 per cent on March 2023 figures (when 45,914 new dwellings were started) and is the third-lowest figure on record.
The only quarters that saw fewer dwellings commenced were in the previous six months, with the September 2023 quarter having seen the lowest number of commencements in recent years, at just 37,958.
New private sector houses drove the increase, rising 4.8 per cent to 25,072 dwellings but are still down 6.7 per cent on March 2023 figures.
Victoria had the largest volume of dwelling commencements in the March quarter, in seasonally adjusted terms (14,024), followed by NSW (8,961) and Queensland (8,352).
But the pipeline of dwellings under construction in the March quarter remains strong, at 226,307 (similar to pre-COVID-19 levels), of which 90,369 were new houses. The large volume of construction activity at the moment may also be impacting the ability of builders to complete dwellings, with 41,329 dwellings completed in the March quarter (in seasonally adjusted terms), nearly matching the record low in June 2023, when just 40,925 dwellings were finished.
This represents a seasonally adjusted quarterly fall of 9.5 per cent and is the second-lowest quarter of housing completions in the last 10 years.
What are brokers seeing?
Speaking to The Adviser about the low volumes of building commencements, Loan Market broker and construction loan specialist Rakesh Swami said he had seen construction finance volumes decrease recently, largely “due to an increase in build costs”.
“The customers who do want to pursue construction loans are the ones who have secured land and have to build, or cashed-up clients who want to knock down and rebuild,” he said.
According to the Norwest-based broker, the majority of clients are currently facing two common issues when it comes to accessing finance for new builds/construction: loan serviceability and not having enough funds towards contribution for construction.
But, even then, he said if he has been able to find a solution for these two issues, there are sometimes issues of builders not completing the job within the relevant time frame.
“This definitely impacts clients in a big way, especially first home buyers, when they have to pay rent and mortgage at the same time,” he said.
“We are seeing a lot of customers who are wanting to buy their first home having to consider moving further away from their traditional local areas to the greater regional areas of Sydney or NSW. They are needing to do this for affordability reasons and so they can still be able to access the first home buyer grants and schemes that are available.”
The low building activity numbers continue to frustrate the government’s plans to build 1.2 million new homes by 2029.
According to the Property Council, Australia needs to be averaging 60,000 homes each quarter over the next five years to reach the government target.
The Property Council’s group executive policy and advocacy Matthew Kandelaars said: “[These] figures reveal the extent of the challenge and just how much we need to lift our game to hit our targets.
“If housing supply stays this low, we will only manage to build around 830,000 homes over the next five years, leaving us a whopping 370,000 short.
“If we don’t start increasing the pace, we will miss what should be an achievable target by a country mile.
“Governments across the country need to utilise every possible measure to assist the industry deliver the supply of new homes we so desperately need.
“We will only achieve our target of 1.2 million homes by applying increasing amounts of federal funding, state resources and a ‘yes’ mindset to reach that goal.
“It’s time to properly address our housing crisis with determination and speed that matches the urgent need to provide more housing for Australians.”
[Related: Dwelling commencements ‘to remain soft’: CBA]
JOIN THE DISCUSSION