Shock record housing commencements result, but where is the affordability

ABS Building Activity released today show a record June quarter in housing commencements, stimulated by HomeBuilder and low interest rates, seeing a massive 212,000 housing starts nationally result, which is around 100,000 homes above previous FY2021 forecasts made at the beginning of COVID.

The 4th quarter June 2021 result of 65,000 commencements alone is the highest quarter of building activity since ABS started the records in 1984.

The record has been bolstered by Victoria being the lead state despite the tough lockdowns. Nationally the result was bolstered by low interest rates and 700,000 cohort of expats returning to Australia against almost equal number of foreign departures.

Despite this result the question to consider is for how long with this surge last and when will it have an impact on house prices.

Across the capitals and against the world’s longest lockdowns, the Victorian commencements sees them out build every other state in FY2021 to contribute to this record activity.

We see that New South Wales and the Sydney activity is picking up momentum in the last quarter with 19,860 commencements compared to their activity earlier in the year.

At 13,799 new starts, South Australia also saw some green shoots recording its highest ever year of residential commencements.

There are questions that remain about how long these record commencements will last amidst low and declining population growth and when will house price growth come back to more stable quarterly rises.

Like praying for rain when in drought, we can only hope that this will impact house prices for them to come back to a stable CPI type gain in future periods and over time bring some affordability back to a landscape that metaphorically is in an affordability drought.

This result also shows that housing policy such as HomeBuilder actually creates supply activity and ‘turning the policy sod’ for sustained affordable supply over a longer term period is critical to locking in any gains that should come through and stabilising a future drop in activity.

The post-COVID-19 and current 2021 Delta lockdown reality impacting low population growth is yet to show impacts on housing affordability even at this heightened activity. There is a need to think beyond recent stimulus to focus on a dedicated affordable supply with a lens to balance a situation that we have never faced ever as a country.