According to the latest state and national outlook reports from the Housing Industry Association (HIA), nearly 130,000 detached homes will commence construction in 2021, breaking the 2018 record of 120,000 starts.
Detached housing approvals have risen every month for the past six months, reaching record highs in December 2020.
According to the HIA forecasts, detached home starts will continue to rise in every state and territory over the 2020-21 financial year compared with the previous.
It added that it also expects the 2021 calendar year to set a new record for detached housing.
HIA chief economist Tim Reardon commented: “Regional locations in many states are showing a larger increase in activity than capital cities as the population moves away from inner-city living.
“The strong conditions for detached homes are in stark contrast to the outlook for multi-units, which will continue to cool. The loss of overseas migration hit the multi-unit sector immediately, and the number of new unit starts is falling rapidly. The population shock is yet to flow through to detached.”
According to Mr Reardon, demand for detached homes has been particularly strong among first home buyers.
He continued: “We expect that this demand will continue into 2022 as the significant shift in population continues and as investors return to the market.”
However, the economist warned that the main constraint on building more than 130,000 detached homes this year would be the availability of residential land.
“Land development slowed in 2020 when the restrictions were introduced and will limit the number of homes that start construction this year,” he explained.
“Skilled trades will be in high demand, but the slump in apartment construction will see these trades shift to detached home building. The supply chain of building products will be stretched, but many building components are manufactured in Australia, including cement, bricks, plasterboard and timber.
“The increase in manufacture of these building components will also create employment.”
The growing number of detached homes has come as Australians look to move away from high-density housing and take up government incentives to build new houses, such as HomeBuilder.
Mr Reardon said that the forecasts show that “HomeBuilder has delivered”, but suggested that the building boom for detached housing will not last for the long term.
He said: “All leading indicators show a record volume of detached homes about to commence construction, and this is occurring in almost every location across Australia. This has not only secured the employment of the 500,000 people employed in detached home construction, it will also absorb tens of thousands of workers from across the rest of the economy.
“The extension of HomeBuilder in November is the primary cause of this significant upgrade in our forecast but the demographic shifts are also driving demand for detached homes.
“This boom in detached home building will not continue. The record year has been facilitated by HomeBuilder, low interest rates and a significant shift in population.”
He concluded: “We anticipate that all of these trends will move against home building in 2023 along with the impact of the loss of overseas migration.”
The federal Minister for Housing, Michael Sukkar MP, welcomed the forecasts, stating that the figures were “testament to Australia’s tradies and to the support HomeBuilder has provided the industry as we build our economic comeback from COVID-19 recession”.
Mr Sukkar continued: “Every one of the 85,000 HomeBuilder applications received to date represents a signed contract, which means more work in the pipeline, keeping our tradies on the tools and in a job.
“According to Treasury, HomeBuilder is now underpinning in excess of $18 billion worth of construction projects at a time when our economy needs it most.”
He concluded: “The Morrison government believes that all Australians should be able to aspire to own their own home, and our tradies are building a stronger Australia in 2021.
“There is no denying there are still challenges ahead in our recovery; however, our today’s figures again reinforce the fact our economic comeback is well underway.
“The Morrison government will continue to work with the sector as we suppress the virus and deliver the vaccine to cement our economic recovery to create even more jobs,” he said.
[Related: Detached housing approvals at record highs]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.