The Housing Industry Association (HIA) is anticipating a 'housing hangover' in 2022, due to longer construction times as materials shortages delay work.
In its latest National Outlook Report, the HIA stated that the economy is benefiting from record numbers of new detached home commencements.
However, with more detached houses beginning construction and fewer homes reaching completion, this means the volume of new detached homes under construction has expanded to a record volume, in all regions.
This trend has been compounded by longer construction times as materials shortages delay work.
The elevated level of demand for materials and the speed that it emerged has resulted in demand outstripping supply for key building inputs such as materials, labour and land.
The delay in the supply of materials will see the impact on labour and ancillary services remain elevated well into the second half of 2022.
Tim Reardon, HIA's Chief Economist, also believes slow population growth will add to the hangover.
"Australia’s annual population growth has fallen to its slowest rate since 1916 with the sharpest decline occurring in Victoria," Mr Reardon said.
"Stable and reliable skilled migration is essential for the sustainability of Australia’s economic growth, beyond the initial recovery," Mr Reardon said.
This decrease in population growth, combined with low levels of immigration, means a low demand for new housing and a subsequent decline in new home commencements over the next few years according to the report.
The report predicts a decline in commencements of new detached homes from mid-2022 when homes initiated by Homebuilder near completion.
It's anticipated there will be 135,390 detached dwellings started nationally in 2020/21, a growth of 32.5% over the previous financial year.
This is a record for the number of starts in a one-year period.
The HIA anticipates that it will be a short-lived record with detached starts in the 2021 calendar year to exceed 143,100, with this record unlikely to be broken in the next decade.
It is expected there will be 125,030 detached starts in 2021/22, a decline of more than 7% from 2020/21.
From mid-2022, however, adverse impacts will emerge from two years of lost population growth, higher building costs and a pulled-forward demand created by HomeBuilder.
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