Coronavirus: ‘Housing to be hit if borders stay shut’

Australia’s booming housing market faces a drop-off in ­demand by next year unless international borders begin reopening.

Master Builders Australia and the Housing ­Industry Association have predicted a medium-term hit to construction if ­migration cannot resume.

Australia’s booming housing market faces a drop-off in ­demand by next year unless international borders begin reopening, with the housing and construction sectors warning residential building activity could slide if migration remains stalled.

Despite the housing and construction sectors surging off the back of federal and state government stimulus support and record low interest rates, Master Builders Australia and the Housing ­Industry Association have predicted a medium-term hit if ­migration cannot resume.

Australian Bureau of Statistics data released on Wednesday ­revealed the number of approvals for new houses and apartments had surged to record highs off the back of HomeBuilder and First Home Loan Deposit Scheme.

Scott Morrison on Wednesday said economic measures ­designed to support the housing and construction sectors through the pandemic had delivered ­record building approvals.

“As we looked into the abyss of this pandemic back last March we knew that we would need to take actions urgently in a range of sectors, but particularly in the residential construction industry, and here we see housing building approvals, people responding to be part of this comeback,” Mr Morrison told parliament.

The Australian understands the government could begin the gradual reopening of internat­ional borders by the end of the year contingent on a successful vaccine rollout, ongoing suppression of COVID-19 and ­enhanced border screening.

In a pre-budget submission, the HIA said the disruption to immigration and drop in population growth would “weigh on demand for housing”. “This drop in demand is ­expected to manifest in a material drop in residential building ­activity in 2022,” the submission says. “There is a high degree of uncertainty about the length of time that this drop in activity will persist beyond 2022, which ­reflects the uncertainty around the prospect for immigration to return.”

The MBA told Treasury ­migration to Australia was the “biggest influencing factor on housing demand”, with expectations migration would remained stalled through 2021-22.

“This will reduce underlying demand for new home building and is one of the biggest medium-term concerns for residential building businesses,” the MBA submission says.

“Our forecasts indicate that the retreat of overseas migration will impact the demand for high-density housing more severely than lower density housing.

 

“Newly arrived migrants tend to enter the rental market for their housing needs, and there is a greater concentration of rentals among apartments and units.”

The HIA, which wants the government to remove the cap of 160,000 permanent migrants a year and develop a new population strategy with medium and long-term targets, said the government should consider easing restrictions for foreign residential property buyers.

It wants the commonwealth annual vacancy fee waived while Australia’s borders remain shut and for national cabinet to consider removing foreign investor surcharges and adopt consistency in the waiving of vacant residential property levies.

The MBA, representing the $210bn construction industry employing almost 1.2 million workers, has urged the government to expand HomeBuilder and the First Home Loan Deposit Scheme, and extend apprentice wage subsidies to all apprentices until the unemployment rate falls below 5 per cent.

The Australian understands while major companies and lobby groups have been pushing Josh Frydenberg to cut the 30 per cent company tax rate, the Morrison government is unlikely to pursue this option in the May budget.

The building and construction lobby group is also pressing the government to extend the $150,000 instant asset write-off until “at least until the end of the forward estimates”.