Could a looming construction crash derail government plans to build 1 million homes?
Treasurer Jim Chalmers will meet with super fund and bank execs this month to ease worries over growing barriers to housing investment as state, territory and local governments face rising pressure to short-circuit a looming construction crash.
After new home sales tumbled 23% last month, the government is ramping up plans to unlock land supply, remove planning approval restrictions, and get affordable housing projects up and running to save thousands of tradies’ jobs, The Australian reported.
With construction businesses facing a perfect storm of high materials costs, labour shortages and low land supply, the government’s housing accord – which pledged to build a million new homes over five years from 2024 – is likely to fail, according to The Australian.
Both the Housing Industry Association and Master Builders Australia have issued dire prognostications of a two-year housing crunch starting in 2024. At the same time, the government is dealing with a worsening rental crisis and supply-and-demand issues as migrants return to Australia.
Chalmers will hold his first housing accord investor round table on Nov. 25 to hear superannuation fund and bank chiefs’ concerns about returns on housing investment. Many believe those returns don’t make sense in the medium term, The Australian reported.
The accord plans to build 200,000 new homes per year to keep up with demand and population growth. However, many industry leaders view it as an “emergency response” to dodge a US-style housing crash and rising homelessness rates.
On Thursday, the HIA released new data showing that house sales plummeted 22/8% in October. The drop followed a 15.8% national fall to the end of September, The Australian reported.
HIA chief economist Tim Reardon linked the drop to the seven consecutive Reserve Bank rate hikes.
“If the RBA doesn’t ease the cash rate in 2023, the government’s goal of building 1 million homes in five years will be very difficult,” Reardon said.
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MBA chief executive Denita Wawn, who worked closely with Chalmers on the plan, said the million-home goal was critical to avoid making housing pressures even worse.
“If we are not putting political pressure throughout the entire three levels of government, plus the investors, plus the industry, to get these long-term fundamental supply issues resolved, then we’re in for serious pain by the end of the decade,” she told The Australian. “While it is ambitious, it’s a must-do. It means we lose jobs as the biggest multipliers of activity in the country, it means we’re precluding people coming to live in the country because we can’t house them, which then impacts other sectors throughout the country.”
Wawn, who sits on the Cbus board, told the publication that developers were telling governments they are “willing to invest in mid-priced housing but the numbers are not stacking up.”
“They’re not stacking up … because of labour shortages, because of uncertainty around materials pricing – but equally, there are huge restrictions on planning and developer charges,” she said.
While builders have work in the pipeline for 2023 and interest rates are expected to stabilise late next year, the following two years are expected to see sharp drops in building activity, The Australian reported.
