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HomeBuilder Rush Lifts Construction Activity by Ted Tabet

Builders are struggling to meet strong growth in demand nationally, triggered by HomeBuilder and state incentive payments, even as apartments, commercial and infrastructure remain subdued.

The Ai Group/Housing Industry Association performance of construction index lifted by 4.4 points to 61.8, above the benchmark 50 level—indicating growth—to be the strongest monthly result in the index’s history.

“Activity is being driven to new heights by a combination of the HomeBuilder program, record low interest rates and shifts in population away from apartments and capital cities towards detached housing and regional areas,” Ai Group economist Angela Lillicrap said.

The monthly index, based on the balance of survey respondents who say conditions are improving, following recent ABS data revealing the number of dwellings approved rose 21.6 per cent in February, seasonally adjusted, after falling 19.4 per cent in January.

Australian Performance of Construction Index, March

Seasonally Adjusted March Index Change from February 12 month Average

Australian PCI 61.8▲ 4.4▲ 45.9▲

Activity 57.7▼ -3.7▼ 44.3▲

Employment 63.1▲ 1.4▼ 48.3▲

New Orders 64.7▲ 14.6▲ 44.6▲

Supplier Deliveries 62.1▲ 5.2▲ 47.6▲

Input Prices 92.9▲ 12.7▲ 72.2▲

Selling Prices 71.8▲ 5.5▼ 47.9▼

Average Wages 71.8▲ 7.4▲ 55.7▼

^Source: PCI, ABS. Results above 50 points indicate expansion.

New orders, employment and supplier deliveries all reached record highs, as house builders nationwide scrambled to commence residential projects in order to meet the final HomeBuilder deadline.

Applications for HomeBuilder have soared to double the Treasury's initially forecast when it was announced in the middle of last year.

It is expected it is likely to cost the federal government around $2 billion as applications can be submitted until April 14.

Private house approvals having risen by almost 70 per cent since its introduction in June 2020.

“New orders went through the roof in March in part fuelled by the looming cut offs for the HomeBuilder program,” Ai Group head of policy Peter Burn said.

“While this surge in new orders is very likely to fade from here on, work will continue to flow through construction supply chains for many months and will provide ongoing stimulus to the sector and the broader economy.”

Wages surged to the highest monthly result since 2008, up 7.4 points to 71.8.

Conditions were positive but slower in apartment building, commercial building and engineering construction.

Australian Performance of Construction Index, March

Seasonally Adjusted March Index Change from February 12 month Average

House building 70.2▼ 0.1▼ 51.3▲

Apartments 53.4▼ 0.8▼ 39.3▲

Commercial 56.2▲ -1.0▲ 41.3▲

Engineering 59.1▲ 1.7▲ 41.8▲

^Source: PCI, ABS. Results above 50 points indicate expansion.

“The record volume of work will see home building absorb workers from across the economy in 2021 and into 2022,” Lillicrap said.

“The outlook for multi-units, unfortunately, will remain poor in the absence of overseas migrants, students and tourists.” The HIA’s current forecasts suggest 130,000 new homes will be built across the country this year, up from the previous peak of 120,000 in 2017.

It warned that figures could slump to just over 91,000 by 2023 as demand falls off thanks to the end of the effects of HomeBuilder as well as the effects of no new migrants arriving in Australia.

The lobby group is also pushing for an extension to spread out that pipeline of work, but also to ease the supply constraints that are already hurting the industry.

The program, estimated to create over $18 billion in construction projects, is open to new-build homes worth up to $950,000 in NSW, $850,000 in Victoria and $750,000 in all other states and territories.

The value of the property cannot exceed $1.5 million pre-renovation.

To qualify, individual applicants must have a taxable income no greater than $125,000 or $200,000 for a couple.

According to REA Group, property sales volumes in 2021 are also 33 per cent higher than last year and expected to remain that way, with strong demand consistent across all states and territories expected to sustain those levels.


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