Budget 2021: Boom-like conditions in residential construction due to HomeBuilder scheme

The federal government scheme will underpin the boom-like conditions in Australia’s residential construction sector over the next 18 months.

There has been a logjam in residential construction currently being felt around the country, with federal and state building stimulus sparking a surge in new home developments. Picture: AFP

The federal government’s HomeBuilder scheme will underpin the boom-like conditions in Australia’s residential construction sector over the next 18 months as almost 100,000 new homes and more than 20,000 renovations inspired by the assistance package make their way through the system.

Treasurer Josh Frydenberg had announced before the budget that the HomeBuilder scheme – under which eligible parties could receive up to $25,000 towards new homes or major renovations – would not be extended beyond its 14 April cut-off date.

But the government did agree to extend the cut-off date for work to start on HomeBuilder homes out to April 2023.

The move in part reflects the logjam in residential construction currently being felt around the country, with federal and state building stimulus sparking a surge in new home developments.

The total pool of construction and renovation work linked to the scheme is expected to total around $30 billion. Victoria was the state to receive the most grants, while South Australia and Western Australia were the most active applicants on a per capita basis, reflecting home value limits in the scheme that may have capped demand from NSW.

In his budget speech, Treasurer Josh Frydenberg said the scheme had driven a sharp jump in both new home builds and loans to first-home buyers.

“New house starts are now the highest in 20 years. New loans to first-home buyers reached their highest levels in nearly 12 years,” he said.

“HomeBuilder has been a huge success.”

Cost inflation and emerging shortages of both materials and labour across the country, however, indicate that the scheme may have been too generous.

The health of the construction sector now is a far cry from the early days of the pandemic, when jobs were being shed and many construction companies were at risk of collapse.

Master Builders Australia chief executive Denia Wawn said the scheme had been crucial to helping the industry survive and the economy recover.

Before HomeBuilder “our guys were getting no sales, contracts were being torn up, things were looking horrendous”, she said.

The decision to extend the time frame under which HomeBuilder projects must start would help smooth out some of the problems felt when new builds were scrambling to meet tight deadlines.

The robust conditions in housing construction have been exacerbated by the strong recovery in the economy, the modest impact of COVID itself in Australia, and other state-based housing incentives.

With international travel off the table, money that would have been spent on overseas trips is also increasingly being poured into home projects.

“We’re not used to having a boom on both the east coast and the west coast, that’s never happened,” Ms Wawn said.

“We are hoping now that we’ve seen that commencement date change that we might see some pressures come off.”

The number of jobs across the construction sector, she says, are only just getting back to where they were before the crisis.

Residential and civil construction is flying on the back of the government stimulus and low interest rates, but commercial construction such as office towers and the like is still in the doldrums and well down from its former levels.