Builder warns of worsening housing affordability crisis,
Australia’s largest home builder has expressed concern that the nation’s efforts to improve housing affordability are “going backwards.”
The pessimistic outlook from the Reserve Bank has severely impacted homebuyer confidence across the country, according to industry experts.
The Housing Industry Association recently released their annual Housing 100 Report, naming Metricon as the largest builder for the ninth consecutive year.
However, the number of new homes initiated by the biggest builders has remained largely unchanged year on year.
This increase went from 57,716 in the 2022-2023 financial year to only 59,981 in the past twelve months.
This stagnation occurs despite state and federal governments announcing various plans to boost construction in the housing market.
Metricon CEO Brad Duggan expressed pride in the company’s accomplishments, but noted concerning trends in new builds initiated recently.
He stated that with just 3,894 new homes started this past year, the figure is far below their peak of over 6,000.
“To be below 4,000 and still be the largest in Australia doesn’t illustrate progress towards meeting housing targets,” Mr. Duggan remarked.
The federal government has set a target of 1.2 million new homes for the nation over the next five years.
However, the latest Top 100 report from HIA indicates that the country is not on track to meet this goal.
Mr. Duggan emphasized that increasing housing construction requires more land supply, additional trades, and managing cost of living pressures effectively.
Although state and federal governments have announced various initiatives, there has been “a lot of talk” without substantial progress on the ground.
Currently, the major issue is homebuyer confidence, which remains strong in Queensland and South Australia but struggles in Victoria and NSW.
As a builder based in Victoria, Mr. Duggan noted that the Reserve Bank is not contributing positively to confidence levels.
“The RBA has not offered clear guidance,” Mr. Duggan explained, pointing to uncertainty in the market.
“In fact, I feel they are intentionally adopting a rather pessimistic approach,” he concluded, expressing concern about the situation.
“Last weekend, we welcomed 3,000 visitors to our display homes; however, they lack the confidence to proceed with purchases.”
When the RBA announced on Tuesday that they would maintain the nation’s cash rate, it affects mortgage interest rates significantly.
In their statement, they indicated they would “remain vigilant to upside risks to inflation,” leaving future actions uncertain.
Many homeowners and prospective buyers had been hoping for a rate cut, as interest rates are currently the highest since 2011.
In August, Reserve Bank governor Michelle Stevens expressed her belief that a reduction in the cash rate would not occur in 2024.
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Mr. Duggan stated that borrowing costs were negatively impacting home sizes. Consequently, single-storey constructions have dominated the housing market over the past year.
HIA chief economist Tim Reardon mentioned there were only 13 homes separating Metricon from the nation’s second-largest builder, ABN Group. This highlights the competitive nature of the housing industry.
Based in New South Wales, Meriton emerged as the largest apartment builder. Furthermore, they ranked third overall, achieving 3,277 unit sales.
However, while Western Australia’s new housing starts increased by 50 percent compared to pre-pandemic levels, Mr. Reardon noted other trends. South Australia and Queensland have remained steady, but NSW has seen a decline of 40 percent since 2019.
Similarly, Victoria’s housing starts decreased by approximately 30 percent. “At the moment, it’s around market confidence,” Mr. Reardon emphasized.
He added, “However, if there is a cut to the cash rate next year, it could accelerate new home building.”
The HIA report revealed that Australia’s top 100 builders accounted for 38 percent of total home construction starts in 2023-2024. This marks an increase from one-third in the previous year.
Moreover, the report indicated that higher energy efficiency requirements for new homes have impacted buyer confidence significantly. Specifically, these changes have added $25,000 to the cost of a typical house.
Looking ahead, the report forecasts that housing construction will rise in Western Australia, Queensland, and South Australia next year. Nevertheless, it is expected to grow more slowly in NSW and Victoria.
Finally, unit construction, which includes townhouses and apartments, is projected to decline well into the next year.
