Experts say upcoming budget will be critical for housing
Master Builders Australia warned Friday that the nation’s goal of building 1.2 million new homes by the end of the decade is slipping out of reach, as new industry forecasts show a significant drop in projected home starts and mounting pressure on the federal budget to respond.
The peak body’s latest forecasts, released March 27, project 995,894 new home starts over the five years of the National Housing Accord – down from the 1,019,818 starts projected in September last year – leaving a shortfall of approximately 204,000 homes.
Chief economist Shane Garrett said the decline reflected the weight of ongoing economic pressures on the sector.
“The goal of 1.2 million new homes before the end of the decade is drifting further away, with a 204,000-home shortfall now predicted,” Garrett said. “Labour shortages, interest rate and inflationary pressures, productivity decline, and the cost of building materials have all continued to hamper the building and construction industry’s capabilities to deliver,” he said.
Non-residential and civil sectors fare better
Not all corners of the industry were in retreat. Master Builders Australia’s forecasts painted a more optimistic picture for non-residential building and civil construction.
Non-residential building activity is projected to reach $377.5 billion up to 2029-30, a 21.9% increase on the previous five years. Civil engineering construction is forecast at $769.4 billion nationally over the same period, up 20.6% compared to the prior five years – though both sectors are expected to soften in the outer years.
Recent instability compounds the outlook
The organisation cautioned that its forecasts do not account for the recent interest rate hike or the ongoing fallout from the conflict in the Middle East – factors it said would likely worsen the industry’s supply difficulties.
Read more: Commonwealth Bank downgrades outlook on Australian economy as Middle East conflict rages
Master Builders Australia also drew parallels with conditions seen during the COVID-19 pandemic, noting that fixed-price contract arrangements are once again forcing many builders to absorb recent cost increases – a dynamic that could push a number of projects from profitable to loss-making.
Chief executive officer Denita Wawn said the situation demanded urgent federal action ahead of the May budget.
“The industry doesn’t want a repeat of COVID and with the federal budget only weeks away, the policy solutions are now even more urgent including responsible tax incentives, elevated workforce and infrastructure investment and a simpler regulation system,” Wawn said.
“The true test for May’s federal budget is ‘will the budget boost new housing and other construction or reduce it?’”
Industry outlines budget priorities
Master Builders Australia’s pre-budget submission calls for investment across four areas: apprenticeship training and skilled migration to address workforce gaps; increased public and private funding for housing-enabling infrastructure such as roads and sewage; tax measures including making the Instant Asset Write-Off permanent at $150,000 and introducing accelerated depreciation for capital works; and a 25% reduction in red tape across the industry’s key regulatory agencies.
The organisation said proposals to reduce property investment incentives – which it argued would decrease new housing supply – should not be entertained in the budget. Any changes to policy settings, it said, must result in a net increase in supply.
