One million new homes by 2028 within reach - Master Builders

Despite a volatile economy in 2022-23, the construction industry has demonstrated its resilience and will further expand over the next five years to hit targets set by the Federal Government’s National Housing Accord 2022, according to peak building and construction industry association, Master Builders Australia.

In 2022-23, total construction activity across Australia expanded by 3.8 per cent to $226.4 billion with most of the heavy lifting done by the non-residential and civil construction sectors, the organisation’s latest figures show.

Master Builders Australia recently released forecasts for the building and construction industry out to 2027-28 which deep dive into the current economic conditions of the industry to provide activity projection over the next five years.

“Australia’s economy is navigating a challenging period. There is no denying millions of Australians and business owners are feeling the mounting pressure of rising costs of living,” said Master Builders Australia CEO, Denita Wawn.

“However, it is not all doom and gloom, there are good reasons for believing we are overcoming the worst of the challenges as long as Government policies do not hamstring these efforts.”

Wawn added housing has been at the forefront of public debate this year with supply being the biggest issue.

In 2022-23, it is estimated 173,755 new homes commenced, which is a 16.5 per cent decline on the previous year.

The following year will see a further drop of 2.1 per cent to around 170,100, well below the 200,000 needed per year to meet population growth, Master Builders predicted.

“However, this will likely be a bottoming out point as supply bottlenecks loosen and we return to a more desirable investment market on the demand side,” Wawn said.

Master Builders forecasted new home starts will peak to just over 241,000 in 2026-27.

“In good news, the projected volume of new starts over the five-year period up to 2027-28 exceeds the one million home target under the Housing Accord but only just," Wawn said.

“There is still a lot of work that needs to be done to achieve the revised target of 1.2 million homes as announced by National Cabinet last month.

“The cost of building homes has been exacerbated over recent years with 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.”

Master Builders acknowledges the efforts of the Prime Minister, Treasurer and Housing Minister to prioritise and co-ordinate efforts across the Federation to tackle the housing crisis but adds there is a real risk the radical industrial relations agenda being pursued by Employment Minister, Tony Burke, will negatively impact these efforts.

“It's like watching a lone dancer perform a different routine amidst a synchronised troupe – counterproductive and out of place,” Wawn said.

“The productive capacity of the industry is critical to ensuring we can sustain high output levels. We need to be attracting more people to the industry and making it easier to do business, not tie a rope around them.

“The economic success of our nation hinges on a strong building and construction industry.

“We know every $1 million worth of residential building activity supports around $3 million in activity across the economy. This multiplier effect is vital to keep our economy away from the risks of falling into a recession.”

The outlook for non-residential sectors looks to be favourable over the next few years thanks to continuous work in the pipeline and substantial investment in the sectors.

“The investment into the non-residential sectors have provided a shield for lulls in residential activity until it picks up towards the end of the next five years,” Wawn said.

“Non-residential building activity is likely to hit a peak during 2023-24 when $54.27 billion worth of work is carried out. We then expect a slow decline with activity, falling to $51.01 billion in 2027-28.

“During 2022-23, $103.17 billion worth of work is estimated to have been carried out in the sector.”

Master Builders forecast activity in the non-residential sector to peak at $124.33 billion during 2024-25 with resource and major transport infrastructure projects doing much of the lifting before activity sinks back quite heavily, falling to $106.42 billion in 2027-28.