While it’s still too soon to tell what impact COVID-19 is having on Australia’s new housing industry, data from the first quarter of 2020 suggests the sector was off to a good start pre-pandemic.
The latest building activity data from the Australian Bureau of Statistics (ABS) shows dwelling commencements and the number of dwellings under construction lifted over the March quarter compared to the end of 2019, and reflected no shudders when COVID-19 lockdowns began in mid-March.
Meanwhile, the number of dwelling completions dropped compared to the previous quarter, with the fall likely driven by the enormous number of new homes under construction across the country.
These figures mark a positive start to the year for the housing industry, and while only time will tell how the sector has fared amid the health crisis, it’s expected the new HomeBuilder scheme, announced in June, will help turn the sod on more new housing in the second half of 2020.
New construction increased while completions fell
Over the March 2020 quarter, there were 44,434 dwelling commencements nationally, which was 3.8% higher than the previous quarter. However, these figures reflect a -1.6% drop in new construction compared to the same time last year and a -27.7% slump from the peak in March 2016.
The number of new housing commencements increased by 3.8% in Q1 2020 compared to Q4 2019. Picture: Getty.
Nevertheless, house commencements held up stronger than units falling -15.2% from the peak in March 2018, while unit commencements dropped -42.2% from the peak in March 2016.
While new housing commencements rose over the first quarter of 2020 compared to the previous quarter, the number of properties completed dropped across the board. There were 47,573 completions over the March quarter, -5.2% fewer than the previous quarter, -10.4% down on the same time last year and -18.9% lower than the peak in December 2016.
Similar to commencements, new housing completions fell by -14.4%, but houses fared better than units over the quarter, which experienced a -28.8% drop in completions.
Number of homes under construction bigger than the 20-year average
At the end of March 2020, there were 189,247 dwellings under construction across Australia. If that sounds like a large number, it is. The 20-year average for the number of dwellings under construction is 145,817.
There were 189,247 dwellings under construction at the end of the March quarter, surpassing the 20-year average of 145,817. Picture: Getty.
The heightened volume of units under construction across the country is a major driver of this construction boom, with 57,149 new houses, 130,687 new units and 1,411 non-new dwellings under construction at the end of the March 2020 quarter.
Of the new units under construction, 39.3% were in New South Wales and 35.4% were in Victoria.
What’s the outlook for new housing post-COVID-19?
The longer-term outlook for new housing commencements is positive following the introduction of the federal government’s HomeBuilder scheme.
While new housing commencements could fall next quarter due to lower consumer confidence after lockdown 2.0 in Victoria, the stimulus package will likely cause a rebound over the final two quarters of 2020. This would mostly be driven by new houses rather than new units, which may be challenged by some of the eligibility rules around HomeBuilder.
Completions, on the other hand, can be a bit lumpy, especially given that such a high volume of units remain under construction. However, new housing completions will likely remain relatively high over the coming quarters given this large volume of stock under construction.
Unit developments come in a variety of shapes and sizes so they can take 12 months to be completed or they can take many years. Given this, the volume of dwellings under construction is likely to moderate over the coming quarters but is expected to remain elevated, particularly in New South Wales and Victoria.
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