2022 to see reduced residential dwelling construction

Construction businesses continue to report ongoing supply delays and price hikes for building materials and inputs

2022 to see reduced residential dwelling construction
2022 to see reduced residential dwelling construction

Data from the Australian Bureau of Statistics showed construction held up stronger than expected in the September quarter with just a 0.3 per cent decline in output despite lockdowns in Sydney and Melbourne.

The value of residential construction was unchanged in the past three months at a total $18.8 billion, but 7 percent higher than at the same time last year..

Residential work done was varied with work done on houses up 3.3 per cent quarter-on-quarter to a record high, while work on other dwellings fell 7.7 per cent quarter-on-quarter to a seven-year low.

Westpac's Andrew Hanlan noted while private residential was broadly flat, there was strength in renovations, which offset a dip in new home building, of - 0.8 percent.

"Home renovation activity has been a stand-out during the covid period, encouraged by record low interest rates and with folk redirecting spending towards home improvements (while the closed national border prevented overseas travel)," he said.

CommSec economists estimate that the number of residential dwelling commencements will ease from 181,000 in 2020 to 178,000 by 2021 year end, before falling to 159,000 in 2022 due to slower population growth and some overbuild supply.

CommSec senior economist Ryan Felsman said supply chain issues and rising labour cost pressures would persist into 2022, until skilled inbound migrant workers return and pandemic demand-supply frictions subside.

“Dwelling commencements could be nearing a peak as the HomeBuilder grant is pared back, property prices moderate and building costs surge,” Felsman said.

“Of course, growing supply chain snarls, elevated freight costs, lower product availability and labour shortages have all combined to constrain output.

"Construction work was supported by the Federal Government’s HomeBuilder grants, record low interest rates, state-based housing grants, first home buyer stamp duty exemptions, rising home prices and heightened connectedness to homes during the pandemic," he said.

"Construction businesses continue to report ongoing supply delays and price hikes for building materials and inputs.

"Builders are reporting shortages for key materials, such as steel, timber, PVC pipes, electrical equipment, concrete, bricks and tiles – all driving up costs," he noted.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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