Master Builders Australia is now expecting a 204,000 shortfall of homes. (Source: AAP)
The Australian government’s ambitious plan to build 1.2 million new homes before the end of the decade is “drifting further away”. The construction sector has sounded the alarm over a growing backlog, which is expected to get worse as the war in the Middle East drives up the cost of fuel and disrupts supply chains and makes building material more expensive.
Master Builders Australia’s latest forecasts show the prospects for new home building have diminished since six months ago. In the face of tougher economic conditions, the nation’s peak body for the building and construction sector now expects 995,894 new home starts, down from 1,019,818.
“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,” Master Builders chief economist Shane Garrett said.
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“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.”
The National Housing Supply and Affordability Council’s first quarterly report this week confirmed no state or territory was on track to meet targets.
Building completions have dropped by 2 per cent over the past 12 months, despite approvals rising 9 per cent.
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The war in the Middle East is expected to exacerbate worsening supply. (Source: AAP)
In the five quarters since the accord started, 219,000 homes have been completed. To meet the target, we would need to be building 240,000 new homes per year.
Housing Minister Clare O’Neil said “fixing a problem generations in the making” would take time, but argued we were seeing good progress on housing supply with more homes approved, built and delivered faster.
“This progress provides a solid foundation for the industry to navigate supply chain pressures emerging from the conflict in the Middle East,” she said.
Master Builders’ shortfall forecast doesn’t even take into consideration the ongoing impact of the war in the Middle East, nor the most recent interest rate hike.
Similar to the pandemic, the group said many builders are now being forced to absorb the cost increases from the past few weeks due to the majority being on fixed price contract arrangements.
Master Builders CEO Denita Wawn said the forecasts were already far from where Australia needed to be and the recent instability would only make things worse.
“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,” she said.
Master Builders is calling on the government to use the budget to open new migration pathways for overseas construction workers to fill shortages, increase private and public investment in housing, increasing the instant asset write-off to $150,000, and streamlining the National Construction Code to reduce red tape.
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