Victorian real estate: Record-low new home forecast could cost the state access to $3bn fund: HIA

Victorian housing construction is forecast to plunge to a decade low in 2024, but encouraging foreign investors and property tax changes could have the state’s tradies back in high demand.

Australia’s tradies and builders will face the brunt of the heavy lifting to meet an ambitious new housing construction target.

Victorian housing construction is forecast to plunge in 2024, even as newly announced plans to solve the nation’s housing crisis hinge on unprecedented home building.

The state’s tradies are forecast to build a decade low 51,368 new homes in 2024, with the number down almost 20,000 compared to 2021.

And a leading economist has warned to get the numbers up Victoria will need to encourage foreign investors, reconsider property taxes and slash planning timelines.

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It comes after a national cabinet meeting this week pledged to make Australia’s housing shortage a key focus, adding 200,000 homes to a previously declared target of building a million new residences across the nation from 2024 to 2029.

The ambitious new figure requires 240,000 new homes to be built each year, with states that go above and beyond to take a share of a $3bn incentive fund revealed by the Prime Minister on Wednesday.

The Housing Industry Association’s National Outlook released today forecasts just 178,839 new apartments, townhouses, units and houses will be built next year.

In 2025 the projections suggest only 195,105 homes will be added to the nation’s housing supply.

New housing construction around Australia will need to hit record levels to meet the national cabinet’s ambitious new targets.

HIA senior economist Tom Devitt said with Australia commencing 231,183 homes in the midst of the HomeBuilder boom in 2021 and more than 234,000 in the 2016 apartment boom, the revised target would actively improve housing affordability and while “ambitious” was “very doable” despite current expectations.

“But it does require explicit actions by the government,” Mr Devitt said.

Better planning regimes around releasing land for development would be a key aspect, however he said incentivising investors — including foreign investors was also vital.

Revising taxes on development and investment, particularly state-based levies on international buyers, would need to be considered nationwide — but particularly in Victoria.

“Victoria’s extra taxes is the exact opposite direction,” Mr Devitt said.

“The need to encourage investors is crucial. That’s the market that needs to drive a much larger share of this in the future.”

With tradie and building jobs expected to fall alongside housing construction numbers, efforts to boost the number of houses being built could also help boost employment for the sector.

Construction jobs in Victoria could benefit from efforts to stimulate the building industry.

He added that despite Victoria leading the nation in house construction in recent years driving it to more than 70,000 home commencements in 2021, the state will be one of the last where home construction volumes bottomed out.

As a result it faced one of the more challenging paths in the 1.2 million national home building program.

“Victoria would be the one the one we are keeping a close eye on, given how many people it lost to other states in the pandemic,” Mr Devitt said.

He noted Queensland would have an advantage thanks to significant internal migration during the pandemic, while NSW was historically the main beneficiary of international migration and was already the nation’s leader in multi-unit development with a more than 10,000 home lead on its nearest rival, Victoria.

South Australia and WA are both positioned to exit the current trough cycle rapidly and could outperform other states on a per capita level, he added.

Housing construction will have to reach unprecedented heights to reach the targets.

While the most recent home building boom led to the collapse of some of the nation’s biggest builders, Mr Devitt said international pressures on materials and trades had eased and were unlikely to cause the same issues they had in recent months.

Despite this, he said consideration needed to be given to improving payment regularity for builders as key issues that had led to major collapses, including Porter Davis, had centred on cashflow problems and fixed contract prices. 

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Originally published as Victorian real estate: Record-low new home forecast could cost the state access to $3bn fund: HIA