Plunging demand to test Victoria’s top home building title

Victoria set to lose top spot for home building as demand falls, while WA could be poised for a post-virus revival.

Coronavirus looks set to dethrone Victoria as Australia’s top building state, according the HIA.

Western Australia looks set to dethrone Victoria as the country’s strongest home building state as coronavirus border restrictions cut growth in housing demand.

The Housing Industry Association’s (HIA) latest Housing Scorecard – which compares building activity around Australia – found that while some activity indicators have yet to show the initial downside impact of the COVID-19 restrictions, change is starting to be seen in new home sales data, building approvals and housing finance.

Victoria topped the list again for home building through the second quarter of 2020 – as it has in eight of the past nine quarters – off the back of strong interstate and overseas migration numbers from students skilled workers, which has created jobs in the construction sector and the broader economy.

However, the dream run may come to an end as COVID-19 restrictions impact the number of people arriving and the ability to buy and sell.

“Home building in Victoria boomed on the back of this strong and sustained population growth, keeping Victoria at the top of the rankings and generating a significant number of jobs in construction and the broader economy,” the scorecard said.

“With the COVID-19 restrictions impairing these cornerstones to the Victorian and NSW economies, there are more jobs at risk in the multi-unit sector in these states.”

On top of international border closures, which have caused demand from overseas students to vanish, all states have banned the movements of Victorians. The change will also effectively halt the property market as only virtual inspections and sales will be allowed, with all residents in the state’s capital ordered to stay at home for the next six weeks.

Fourth ranked NSW is also likely to struggle over the next year, with the federal government's HomeBuilder stimulus package unlikely to support the highly priced and scarce market.

Will there be any winners?

At the other end of the spectrum, seventh ranked Western Australia could be poised for a post-virus revival. The strength of the state’s health response, little reliance on overseas migrants for demand and an improvement in the state’s financial outlook are each likely to work in the west coast’s favour.

“In the COVID-19 recession era, this vice could be WA’s virtue,” the scorecard said.

“Not only is the east coast looking less attractive for those seeking jobs, but employment growth in the mining sector is continuing to grow. Add to this an expected surge in home building that will follow from HomeBuilder and the WA Building Bonus and it could be the first state to pull forward from the COVID-19 recession.”

The latest CoreLogic figures indicated coronavirus had done little to derail the bottom of the Perth market, which recorded marathon declines from the end of the 2014 mining boom until midway through last year.

The full impact of COVID-19 and stimulus measures, including HomeBuilder and state based stamp duty exemptions, will take some months to emerge in official data.

Tasmania maintained its second spot ranking after surging up the list in recent years, supported by demand from investors and leads third-placed South Australia.

ACT’s strong multi-unit development and a rapid slowdown in its population growth rate has impacted its ranking, which slipped to fifth.

Queensland placed sixth with a strong renovation trend, while the Northern Territory remains the weakest housing market in the nation because of limited market drivers.