Master Builders Australia has revised its forecasts for the building and construction industry amid ongoing inflationary pressures and tradie shortages.

MBA Chief Executive Denita Wawn said new home construction was likely to fall well short of the 200,000 new homes needed to keep up with long-term population growth.

“While pandemic conditions brought forward some residential building demand, the current economic conditions of interest rates hikes, inflation increases, and continued shortage of workers and materials, are significantly contributing to the decline,” Ms Wawn said.

This report comes after the Australian Government announced it will lift its migration cap by more than 20% this year to nearly 200,000.

According to the MBA’s prediction, new residential builds will fall until 2024 before it picks back up again in 2025.

2022 2023 2024 2025
192,060 189,480 174,930 188,410

Source: MBA residential construction forecast

Ms Wawn said there are other factors to consider when examining the long-term challenges of the residential construction sector.

“Shortage of land in the right places, high developer charges, and inflexible planning laws also restrict opportunities to meet the housing needs of our future,” she said.

CoreLogic Economist Kaytlin Ezzy echoed a similar sentiment.

“The scarcity of available residential land continues to be a driving factor across Australian land markets, with land prices surging at a time when the number of lots sold is declining,” Ms Ezzy said.

“While increasing interest rates, rising construction costs and increased uncertainty, particularly across the building industry, has likely smothered some land demand, the surge in land prices suggests that those that want to build are finding it difficult to secure lots.

“With land often taking more than a decade to move though the development pipeline, it’s unlikely we’ll see any material change in land supply for some time.”

Despite a rocky road ahead for the home construction industry, non-residential building activity will fare better with a 1.1% decline in 2023 followed by a 6.2% increase in 2024.

Data released from the Australian Bureau of Statistics found construction work fell 3.8% in the June quarter. 

New building approvals also dropped sharply by 17.2% in July 2022, with the RBA cash rate increase likely playing a leading role in the decline.

Read More: What happens when your builder goes bust? A guide

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Building a home? This table below features construction loans with some of the lowest interest rates on the market.

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Filters
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.14% p.a.
6.20% p.a.
$2,047
Interest-only
Variable
$0
$835
70%
6.43% p.a.
6.68% p.a.
$2,143
Interest-only
Variable
$0
$530
90%
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6.43% p.a.
6.68% p.a.
$2,143
Interest-only
Variable
$0
$530
90%
6.45% p.a.
6.20% p.a.
$2,515
Principal & Interest
Variable
$0
$1,520
60%
6.74% p.a.
6.42% p.a.
$2,247
Interest-only
Variable
$0
$600
90%
6.92% p.a.
6.95% p.a.
$2,307
Interest-only
Variable
$0
$300
80%
6.94% p.a.
7.19% p.a.
$2,313
Interest-only
Variable
$0
$530
80%
7.09% p.a.
7.45% p.a.
$2,363
Interest-only
Variable
$0
$500
80%
7.81% p.a.
7.84% p.a.
$2,882
Principal & Interest
Variable
$0
$600
69.99%
8.29% p.a.
8.62% p.a.
$3,016
Principal & Interest
Variable
$0
$0
80%
8.56% p.a.
8.58% p.a.
$2,853
Interest-only
Variable
$0
$600
69.99%
8.68% p.a.
8.75% p.a.
$2,893
Interest-only
Variable
$0
$800
95%
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Image by Avel Chuklanov via Unsplash



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