Australian Property Investor Magazine
Australia’s housing supply pipeline is being squeezed from multiple directions, with construction costs accelerating, skilled labour remaining scarce, new-home sales weakening and developers facing tougher decisions about whether projects can still stack up financially.
The pressure is emerging just as governments and the private sector attempt to increase housing construction, raising concerns about how quickly new projects can move from approval to completion.
Ray White Group’s Chief Economist, Nerida Conisbee, said the construction industry was confronting another increase in costs after several years of significant inflation.
“Just as those pressures appeared to be easing, construction costs are accelerating again,” Ms Conisbee said.
The latest data shows new dwelling prices were 5.7 per cent higher in July than a year earlier, compared with annual growth of just 0.7 per cent in June last year.
The ABS attributed the increase to builders passing through higher labour and material costs.
The demand for more homes is clearly there but the greater challenge is whether projects can move from planning to construction and from construction to completion while builders face higher costs, developers confront tighter viability thresholds and the industry competes with major projects for scarce labour.
REIA President, Jacob Caine, said the impact of weaker developer confidence could extend beyond individual businesses.
“Projects delayed or cancelled today mean fewer homes reaching buyers and renters tomorrow,” Mr Caine said.
“With Australia already facing a serious housing shortage, government policy should support investment and housing delivery, rather than create further uncertainty for the businesses supplying new homes.”
Oscar Stanley, National President, UDIA, put the issue more bluntly.
“Housing is built on confidence and capital, if we keep making both harder to find then eventually the homes disappear from the pipeline,” Mr Stanley said.
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