HIA Industry Update – February 2021
The latest ABS Building Approvals data shows that detached dwelling approvals for the Hunter grew 6 per cent in the year to November 2020 compared to the same period a year earlier and surged by 44 per cent in the previous 3 months.
Major renovations and additions are also performing strongly with the value of works increasing over the past 12 months by 7 per cent across Newcastle and Lake Macquarie and 8 per cent in the Hunter Valley. This is in response to household spending shifts away from travel and entertainment.
This activity shows that that the region has benefited from the HomeBuilder stimulus and that we have not been immune to a change in consumer preferences towards detached dwellings that HIA has noted in other jurisdictions.
Building approvals however, are a lagging indicator of activity as they follow on from the process of obtaining loan approvals from financial institutions and the signing of a construction or renovation contract. Looking at this data provides an indication of the level of building activity expected in the future.
Nationally the number of loans for the construction of a new dwelling rose for the sixth consecutive month in November to reach a new record. Across the state the number of loans to owner-occupiers for the construction of a new dwelling in the 3 months to November 2020 increased 43.2 per cent compared to the year prior.
While HomeBuilder was the catalyst for improving consumer confidence in the housing market, the strength of housing finance data is also due to several factors including low interest rates.
The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is also a leading indicator of future detached home construction.
HIA data for new home sales in the December quarter was higher in New South Wales by 61.7 per cent when compared with the same period in 2019 as home owners rushed to secure the $25,000 HomeBuilder grant.
The extension of HomeBuilder to allow contracts to be signed before March 2021 with a grant of $15,000 will further support the sales of new homes into 2021, but not at this elevated level.
Overall the high approvals pipeline combined with the latest lending and new homes sales data indicate that the residential construction sector will continue to be strong over the coming months and the extension of HomeBuilder will see these strong results carry on. This will support local jobs on the ground throughout 2021.
If you would like to know more about 2021 and HIAs thoughts on the impacts of COVID on home building activity than the HIA Industry Outlook Breakfast on March 11 is a MUST ATTEND event. Get expert insight into the HomeBuilder scheme and have your questions answered by HIA’s Chief Economist, Tim Reardon.
HomeBuilder has driven very strong demand for detached home construction across the economy with significant increases in population outside of capital cities. But how far will home building decline when HomeBuilder ends? Will detached home building fall away due to the constraints on migration just like the apartment sector?
Secure your spot at Souths Merewether today by visiting www.hia.com.au/events or call the HIA Events team on 02 4014 2000.
Craig Jennion
HIA Executive Director – Hunter