Challenges bring us together

There is no doubt our industry is under pressure. A shortage of skilled trade contractors has been a perennial problem but made worse by levels of demand not seen for decades. Building materials are in short supply, and their cost has risen significantly due to factors that are beyond our control and could not have been foreseen.

Developers are facing a shortfall in land supply. And builders are working their way through a backlog of contracts against a backdrop of shortening deadlines and rising costs.

We’re facing significant challenges not seen for decades. But together, our industry is overcoming these hurdles and – thanks to a robust industry model recognised globally – continuing to deliver quality housing for our collective customers!

“We’re facing significant challenges not seen for decades. But together, our industry is overcoming these hurdles and (…) continuing to deliver quality housing for our collective customers!”

And, in more good news, HIA’s recently released Outlook data indicates the pressure should ease slightly in the new financial year and that by mid- 2024, we hope to see a better balance between supply and demand should have been restored.

So, what’s driving demand and hindering supply – and what needs to be done to achieve greater balance?

Firstly, demand. Homebuyers have been out in droves during the pandemic (lock-downs permitting) and HomeBuilder was the catalyst for bringing this demand to market, but record low-interest rates (now on the rise), the pandemic-related desire for more space and amenity, and a rapid economic recovery have all further contributed to driving demand.

The result? There was 46,650 detached house starting in Victoria in 2021 – the strongest year on record (and 17.1 per cent higher than the previous year).

But on the other side, the pandemic has put a tremendous strain on supply. Tradies, materials and even land have been hard to find as a result of supply issues associated with the pandemic – placing dramatic upward pressures on their cost.

HIA’s Outlook Report shows the average price of key home building materials in Australia rose by 15.4 per cent in the 12 months to March 2022 – the fastest rate since 1980 and three times the rate of inflation over the same period. Some products have seen much higher rates of increase.

“HIA’s Outlook Report shows the average price of key home building materials in Australia rose by 15.4 per cent in the 12 months to March 2022 – the fastest rate since 1980 and three times the rate of inflation over the same period.”

Global demand for shipping containers and services on the back of housing booms and locked-down households around the world has also increased the cost of supply and operations for Victorian builders. Surging oil prices from late 2020 and more recent price spikes associated with the War in Ukraine have compounded these problems.

There are signs that some of these supply constraints are easing but until they do our industry will need to continue to work even more closely together as the imbalances are resolved.

HIA’s Outlook Report doesn’t point to that happening quickly. Commencements of detached homes in Victoria are expected to continue to decline by 11.2 per cent in the 2021/22 financial year and then by 8.3 per cent in 2022/23. This would see 37,500 new homes started, but this still makes the new financial year one of the top five years for Victoria on record.