The next home-building boom is coming
Home-building will pick up from the end of this year on demand from existing homeowners and investors, peaking at 254,000 starts in 2027, new forecasts from consultancy Macromonitor show.
Housing demand from so-called changeover buyers – people downsizing or upsizing – has returned to the level it was at before the former Coalition federal government’s HomeBuilder incentive payments, and they are more likely to buy detached houses than apartments, Macromonitor says.
“From here we expect change-over buyers and investors generally to be the main sources for investment because we also expect that first home buyers have greater issues with affordability,” Macromonitor economist Emily Bray told The Australian Financial Review.
“We anticipate a trajectory towards a renter society with young people and new migrants priced out of the housing market.”
While soaring borrowing costs and construction costs have made new projects unviable for many developers and stymied the development of new housing, the chronic shortfall and rising rents will pull in capital to fund new projects. New loans to investor buyers rose 5.6 per cent in April, their fastest monthly rate since November 2021.
The upswing – led by a greater mix of detached homes – will lift Australian housing starts sharply from a forecast 162,000 this financial year (a 6.5 per cent decline from FY23), up nearly 12 per cent next year to 181,000, up 20 per cent in FY26 to 217,000 and a further 16 per cent to 251,000 in 2027, Macromonitor estimates.
While the predicted pick-up in housing construction will not be enough to meet national cabinet’s total 1.2 million new homes over the five years to 2029, it does indicate a pick-up in overall housing construction capacity, Ms Bray said.
“The average over the cycle is gradually increasing in commencements. We expect that to continue.”
It also points to a narrowing of Australia’s extreme housing shortage over the next decade.
“The implied stock balance does tend to go through these cycles of shortages and surpluses, so then does tend to head back to a point of net zero briefly,” she said. “We do expect that to head back toward zero.”
Australia’s so-called occupant demand – the total number of dwellingsrequired to accommodate residents in a particular region – will climb from an average 188,000 homes between 2017 and 2021 to 216,000 homes over the following four years to 2026, Macromonitor estimates.
As a “rough” estimate, demand attributable to net overseas migration would account for between 130,000-135,000 dwellings a year between 2022 and 2026, or an average 60 per cent of the total each year of the five-year period, Ms Bray said.
“Increasing occupant demand largely stems from a large influx of migration,” she said. “However, new migrants may struggle to enter the housing market and, accordingly, investors will be needed to fill this gap.”
The pick-up in home-building that would reach its peak in 2026 would go some way to balancing out expected declines in other sectors such as transport, utilities and mining, and keep the overall level of activity high in a “quite unusual” upturn, Ms Bray said.
“It’s such a long, prolonged upturn in total construction because we have these various waves across different sectors occurring at different times which means total construction is continuing to be propped up,” she said.
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