While total construction activity – non-residential and civil construction sectors – across Australia expanded by 3.8% to $226.4 billion in 2022-23, forecasts for new home building activity are currently declining, with Master Builders Australia (MBA) estimates suggesting new homes dropped 16.5% (to 173,755) on the previous year.

However, forecasts suggest better times ahead for the apartment market.

Based on the industry body’s forecasts, 2023-24 will see home starts decline by another 2.1% to around 170,100 – well below the 200,000 needed per year to meet population growth – with new home starts peaking at just over 241,000 in 2026-27.

The projected volume of new starts over the five-year period up to 2027-28 – due in part to a boom in new apartment development – is expected to exceed the one million (1.04 million) home target under the Housing Accord.

MBA forecasts imply a notable uptick in apartment development. For example, while the proportion of standalone homes is expected to drop to 56% by 2027/28, from 63.4% in 2022, forecasts don’t differentiate between traditional for-sale apartments and build-to-rent apartments.

While this is good news, Master Builders Australia CEO Denita Wawn says a lot of work needs to be done to achieve the revised target of 1.2 million homes as announced by the National Cabinet last month – which she adds are stretch targets contingent on macroeconomic conditions.

Based on MBA figures, the value of residential building work peaked at $74.9 billion during 2021-22 and is pegged to plateau at $63.3 billion in 2023-24.

We’ve estimated we need 500,000 new entrants into our industry over the next five years

Skilled worker shortage & red tape

What’s exacerbated the cost of building homes over recent years notes Wawn is unnecessary delays and barriers encountered on their journey to completion.

“This includes planning impediments, lengthy approval processes and high developer charges on new land developments,” she said.

Interestingly, in an effort to turbocharge land releases, planning and approvals, the national cabinet recently signed off on $3 billion in ‘performance bonuses, which Wawn notes is something new.

Recently announced bonuses follow a one-off $2 billion granted by the Albanese government two months ago for the states to immediately build or refurbish social and affordable housing.

Red tape aside, Wawn notes that any expected uptick in home-building will require skilled migrants, especially given the number of people leaving the industry.

“We’ve estimated we need 500,000 new entrants into our industry over the next five years,” she said.

At first blush, Property Council CEO Mike Zorbas expects government incentives to move the dial in the right direction.

He calls on state planning systems to pick up the mantle and accept ‘nationwide accountability for providing all Australians with a chance to have a roof over their heads.’

Non-residential

Meantime, while the investment into the non-residential sectors has offset the lull in residential activity, Wawn expects [non-residential] building activity to peak during 2023-24 when $54.27 billion worth of work is carried out.

She expects a slow decline with activity [in the non-residential sector], falling to $51.01 billion in 2027-28, compared with $103.17 billion worth of work carried out in 2022-23.

“We forecast activity to peak at $124.33 billion during 2024-25 with resource and major transport infrastructure projects doing much of the lifting to get us there before activity sinks back quite heavily, falling to $106.42 billion in 2027-28,” noted Wawn.