HIA National Outlook Final Autumn 2023

HIANational Outlook

ECONOMIC OUTLOOK

HIA FORECASTS

OTHER ECONOMIC INDICATORS

INDICATORS OF HOUSING INDUSTRY ACTIVITY

A quarterly update on the housing & renovation industry

Autumn edition 2023

Tom Devitt Senior Economist

Produced by HIA Economics

Tim Reardon Chief Economist

Todd McInnis Senior Economist

Maurice Tapang Economist

Kirsten Lewis Economics Coordinator

Australia

Autumn Edition 2023

Data included until 17th May 2023

economics.hia.com.au

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Summary

Stable and reliable policy settings required

Home building is set for an ongoing roller-coaster ride as policy settings continue to set supply and demand factors in opposite directions.

Australia’s housing markets are faced with exceptionally strong underlying demand, driven by a strong economy, low unemployment, high population growth and fewer people per home. At the same time, the rapid increase in the cash rate has compounded the barriers created by extraordinary macro prudential restrictions, increasing regulatory costs and surging construction costs.

The constraints imposed on the market are leading to a rapid slowdown in work entering the pipeline, just as migration reaches record highs. This slowdown is most evident in the multi-unit market where starts are more than 60 per cent below their peak in 2016. This is most evident in Sydney and Melbourne, where most of the overseas migration is likely to reside.

This mismatch will see pent-up demand for housing continue to increase, leading to further rental price growth before eventually leading to a recovery in home building activity.

A return to balance between supply and demand for homes requires four key actions. Every increase in the cost of new home building constrains supply. Even in 2023 additional costs are to be imposed on new housing despite evidence that they do not provide a net public benefit. So, firstly, do no harm.

Secondly, attract more investment. Owner occupiers have been forced from the market for more than a decade with very restrictive macro-prudential rules, despite a lack of evidence of a problem. State and federal governments have worked cooperatively to force foreign investors from investing in building new apartments despite them not being able to compete in the established home market. Foreign investors can only build new ones. Their exit from the market is a key reason apartment supply is contracting.

Thirdly, the building industry is suffering from a series of structural and cyclical capacity problems. Labour and material supply problems will ease, with time, if there is a stable market.

Finally, the building industry has consistently sought stable and reliable migration to ensure that there is economic growth in the absence of productivity growth and stable demand for new homes. Two years of closed borders wasn’t sufficient to increase the supply of housing stock to meet the pent-up demand. This has been followed by a ‘catch-up cycle’ with record levels of migration.

The boost to population wards off a recession, helps restore the budget to surplus, eases labour shortages and offsets the ageing population problem. But there is a very large price – a housing shortage.

Governments have many conflicting goals, but if they are going to increase the population, they are also obligated to take all measures to reduce the cost of new homes, improve capacity and attract more investment.

The Housing Australia’s Future Bill that failed to pass Parliament at the last sitting aims to address the affordability problem. It is not, in itself, a solution to all the challenges but if passed it will improve the quality of housing data and coordination across state and local governments and increase investment in public housing. These are necessary steps to addressing the supply shortage in the long term.

In the short term, a policy catalyst is needed to convert the market’s strong fundamentals into home building. These policy settings include: an easing in the extraordinary macroprudential restrictions; an indication that the RBA has ceased increasing rates; a pause in additional taxes and imposts on new homes; permitting foreign investors to build new homes they don’t occupy; and removing the ability of local councils to control planning processes. These would all assist in placing a floor under the looming trough of home building.

In the face of these competing forces, new home construction will remain constrained until there is a policy catalyst to restore market confidence

Detached houses

Detached house commencements remain on track to reach their lowest point in more than a decade, in 2024. Starts in the final quarter of 2022 fell by 0.4 per cent to just shy of 28,900. This was the weakest quarterly performance in over two years, though still produced one of the strongest annual figures on record of 119,920 commencements for the 2022 calendar year.

Commencements are forecast to continue downwards into the second half of next year under the weight of higher interest rates. This would produce a decline of 9.4 per cent in 2023 and 11.3 per cent in 2024, reaching an annual trough of just 96,310 – the weakest year since 2012, the last time the RBA drove down

the housing market with a rate hiking cycle. A modest 1.6 per cent recovery in 2025 is expected followed by a stronger recovery of 7.5 per cent and 5.5 per cent, reaching 110,980 in 2027.

Multi-units

Constrained by regulatory and construction costs, multi-unit commencements stalled in the final quarter of 2022 to be 62.4 per cent lower than their peak in March 2016 with just 12,750 starts. This is the weakest quarter in over a decade and produced an annual total of just 63,240 commencements for 2022, a decade low. This has required a downgrade to our forecasts.

Supply constraints are expected to continue to hold back the sector this year, with commencements increasing by just 6.6 per cent to 67,430, before mounting a steeper recovery on the back of strong fundamentals in 2024. Multi-unit commencements are forecast to increase by 23.8 per cent and 11.6 per cent, reaching 93,170 in 2025, before peaking at 94,030 in 2026

HIAForecast-Australia

Source: HIA Economics

SpecialTopic:2023-2024Federal Budget

The Federal Budget 2023 is focused on delivering measures aimed at easing cost-of-living pressures while reining in large budget deficits over the next years. For the home building industry, this is a budget that strengthens existing housing affordability measures, improving industrial and workplace relations, funding more places for training, business support, and an overhaul of the skilled migration scheme. The Budget does not emphasise on resolving longer-term, structural issues in housing, as it sets to aim for the low-hanging fruit of short-term housing issues. Key measures have been put in place in this Budget to further boost productivity in the short-term, but the Government could do more in the succeeding Budgets to address and sustain longer-term economic growth. With the Government’s aim to rein in on the near-term budget deficit and spend more responsibly, it is no surprise that these longer-term measures have been deferred.

One of the key areas that small to medium-sized businesses could benefit from in this Budget are revisions to asset write-off provisions, energy-efficiency incentives, improved tax engagement and compliance, and support measures, particularly for businesses operating in the priority areas of the National Reconstruction Fund. Small business can now write-off assets costing less than $20,000 for use or installed ready-for-use between 1 July 2023 to 30 June 2024 and benefit from energy-efficiency tax deductions through the Small Business Energy Incentive.

Another focus of the Budget is on training, through the Australian Skills Guarantee, targeted support for apprenticeships, skills funding agreement with the states and territories, funding for youth employment and training, and most notably fee-free TAFE and vocational education places. Lastly, the Budget also places priority on improving processing times for visas for skilled migrants, but their long-term plan to overhaul the migration system is not touched on this budget.

Favourable revisions to assumptions about the key drivers of tax revenue improve the outlook for the budget over the forecast horizon. Nevertheless, the budget is expected to come under greater pressure in the years ahead as cost of efforts to contain inflation begin to bite. A budget deficit is projected to return in 2024/25, and to remain in deficit each year beyond 2033-34.

Slower economic growth and a rise in unemployment are expected slow growth in income tax receipts and contribute to an increase in welfare expenditure. Business profits are also likely to soften as GDP growth slows, which will see slow growth in corporate tax revenue. In 2024-25 the stage three tax cuts will also hand back some of the bracket-creep that has bolstered income tax receipts.

Some elements of the Government’s policy platform will impact productivity growth positively in the shortterm. It remains to be seen whether their platform in its entirety will set Australia on a path to sustainable productivity improvements over the long term. There is significant investment in transitioning to lower carbon emitting energy sources, but this investment comes with range of risks. Population growth, primarily through migration, will continue to play a prominent role in driving growth.

Summary of key budget measures:

Housing measures:

Despite housing costs being a prominent issue, housing was not a key focus of this year’s budget. The Government’s housing agenda is focused on having the measures announced in the October 2022 Budget (establishing the Housing Australia Future Fund etc.) through parliament, which is currently being blocked by cross bench Senators.

The housing measures in this year’s budget are predominantly amendments to existing policies. The new measures introduced this year include:

• Supporting growth in the Build-to-Rent market;

• Broadening eligibility criteria for the Home Guarantee Scheme;

• Addressing the rise of silicosis in workers and develop a national strategy for the prevention of silicosis and silica-related diseases;

• Increasing the guaranteed liability cap for the Affordable Housing Bond Aggregator;

• Increasing in the rate of Commonwealth Rent Assistance;

• Improving the Nationwide House Energy Rating Scheme (NatHERS); and

• Establishing the Household Energy Upgrades Fund to improve energy efficiency of existing homes.

Industrial relations measures:

The Government is continuing to implement the industrial relations agenda outlined during the election campaign and at the Jobs and Skills Summit in 2022. Measures announced in this Budget include several cuts to programs established by the previous government, with savings from these cuts directed towards the Government’s priorities. Funding has been allocated to establish the National Construction Industry Forum, which will include representatives from key employer groups, unions, and government to provide advice on major challenges facing the building and construction industry across issues relating to workplace relations, industry culture, skills and training, safety, gender equality, and productivity.

Training measures:

The government is in the process of implementing election promises which were committed to in the previous budget. The most significant budget item in the training portfolio is a reform of apprenticeship support services delivered by Australian Apprentice Support Network providers. The reforms aim to have services better targeted to improve the rate of apprentice and trainee completion. Grant funding of $5.0 million over 3 years from 2024-25 will be provided to organisations with appropriate expertise in supporting women in the workplace, to further support women in historically male dominated trade apprenticeships.

Business measures:

The budget contained few measures aimed at supporting businesses, one of which is an extension of the instant asset write-off scheme. The scheme has been a perennial reannouncement in recent Budgets, having last been announced in the 2021-22 Budget with an end date of 30 June 2023. The re-announced policy will enable businesses with turnover up to $10 million to deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. Other measures include a scheme to lower energy costs and scheme to incentivise small businesses to improve energy efficiency.

Detailed information on the key Budget measures is provided below.

Economic Outlook

Economic growth

The Australian economy is expected to resilient during a period of slowing global growth. Real Gross Domestic Product (GDP) is expected to have grown by 3.25 per cent in 2022/23 and is forecast to slow to 1.5 per cent in 2023/24 before recovering to an annual rate of 2.75 per cent in the outer years of the forecast horizon. The forecast for slower growth in 2023/24 reflects a weaker outlook for economic growth globally as major economies take measures to contain inflation. Strong demand for Australia’s resource exports following the reopening of China’s economy should continue to support growth.

Key Treasury Forecasts underlying Budget 2023/24:

growth

growth, primarily through migration, will continue to play a prominent role in driving economic growth. Australia is currently experiencing a rebound in immigration following border closures. The strong level of population growth from net overseas migration is expected to continue in 2023/24 before reverting to pre-pandemic trend levels in 2024/25. The government has outlined their intent to implement reforms that include restoring pathways for migrants on temporary visas to become permanent residents, although there

has been no indication on the extent to which these reforms are likely to affect aggregate numbers of temporary and permanent migrants residing in Australia.

CPI inflation

Inflation peaked at the end of 2022 and is now moderating. Supply constraints and the impact of Russia’s invasion of Ukraine have begun to subside and the Government’s Energy Price Relief Plan is expected to further reduce inflation in 2023–24. This should see inflation return to the RBA’s target band in 2024–25, although cost-of-living pressures will remain a near-term weight on households.

Labour market

The tight labour market has persisted but is expected to gradually soften in response to slowing demand. The unemployment rate is expected to increase modestly from a near 50-year low of 3.5 per cent to 4.25 per cent by the June quarter of 2024, and 4.5 per cent in the June quarter of 2025. Even with this modest rise, the unemployment rate is expected to remain low by historical standards.

Dwelling investment

Treasury notes that as existing work in the pipeline is completed and the impact of earlier interest rate hikes and house price declines flow through the system, the value of residential building work done is expected to contract by 3.5 per cent in 2023–24. The downturn in activity is expected to extend into 2024–25, with a further 1.5 per cent decline anticipated, before recovering strongly over 2025 and onwards. The recovery is expected to be driven by demand from net overseas migration, strong rental yields, lower interest rates and a reduction in building input costs, particularly in medium and high-density housing. Government initiatives to boost supply will also assist in supporting investment in new dwellings.

Policy detail:

Housing measures:

Housing (Build-To-Rent Developments)

For eligible new build-to-rent projects where construction commences after 7:30 PM (AEST) on 9 May 2023 (Budget night), the Government will:

• increase the rate for the capital works tax deduction (depreciation) to 4 per cent per year

• reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30 per cent to 15 per cent.

Addressing Silicosis and Silica-Related Diseases

The Government will provide $10.0 million over 4 years from 2023–24 (and $1.9 million per year ongoing) to address the rise of silicosis in workers and develop a national strategy for the prevention of silicosis and silica-related diseases. Funding includes:

• $4.7 million over 4 years from 2023–24 (and $0.8 million per year ongoing) to establish a dedicated occupational lung diseases team to oversee implementation and investigate long-term reforms for an improved national framework for occupational lung diseases;

• $4.2 million over 4 years from 2023–24 (and $1.1 million per year ongoing) to extend the Asbestos Safety and Eradication Agency’s remit to include the prevention of silicosis and other silica related occupational diseases and broaden the functions of the Asbestos Safety and Eradication Council; and

• $1.2 million over two years from 2023–24 to Safe Work Australia’s social partners to increase awareness and support better work practices relating to managing silica dust in the workplace.

Home Guarantee Scheme amendments

Broadening eligibility criteria for the Home Guarantee Scheme to enable any 2 eligible borrowers (not only married and de facto couples), and non-first home buyers who have not owned a property in Australia in the preceding 10 years to access the scheme. Eligibility is also extended to permanent residents, rather than limiting eligibility to Australian citizens. Amendments to the scheme will also enable legal guardians of children to access the Family Home Guarantee, rather than limiting eligibility to only parents.

National Housing Supply and Affordability Council

The Government is also enabling up to 3 additional members to be appointed to the National Housing Supply and Affordability Council to provide a greater breadth of policy expertise.

Increasing the Supply of Social and Affordable Housing

The Government will increase guaranteed liability cap of the National Housing and Finance Investment Corporation (NHFIC) by $2.0 billion to $7.5 billion to enable NHFIC to increase its support for social and affordable housing through loans from the Affordable Housing Bond Aggregator.

The Government will also amend NHFIC’s Investment Mandate to require NHFIC to take reasonable steps to allocate a minimum of 1,200 homes to be delivered in each state and territory within 5 years of the Housing Australia Future Fund commencing operation. An amendment will also enable NHFIC to redirect interest earnings on unallocated funds to support more social and affordable housing and delivery of housing priorities.

Increased Support for Commonwealth Rent Assistance Recipients

The Government will increase the maximum rates of the Commonwealth Rent Assistance (CRA) allowances by 15 per cent to help address rental affordability challenges for CRA recipients.

Household Energy Upgrades Fund

The Government will provide $1.3 billion in funding to establish the Household Energy Upgrades Fund to support home upgrades that improve energy performance and save energy. Funding includes:

• $1.0 billion in funding to the Clean Energy Finance Corporation to provide low-cost finance and mortgages in partnership with private financial institutions for home upgrades that save energy;

• $300.0 million over 4 years from 2023–24 held in the Contingency Reserve to support upgrades to social housing, in collaboration with states and territories, that save energy; and

• $36.7 million over 4 years from 2023–24 (and $2.1 million per year ongoing) to develop further initiatives to improve energy performance, including expanding and modernising the Greenhouse and Energy Minimum Standards program and the Nationwide House Energy Rating scheme.

Industrial relations measures

Safe and Fair Workplaces

The Government will provide $27.4 million over 4 years from 2023–24 (and $1.1 million per year ongoing) to improve the safety and fairness of workplaces and continue detailed consultation with key industries. Funding includes:

• $20.0 million over two years from 2023–24 to increase to the Productivity, Education and Training Fund, to support engagement and practical activities of worker and employer representatives with workplace reforms as they progress and the implementation of the Government’s Workplace Relations agenda;

• $4.4 million over 4 years from 2023–24 (and $1.1 million per year ongoing) to establish the National Construction Industry Forum including representatives from key employer groups, unions and government to provide advice on major challenges facing the building and construction industry including workplace relations, industry culture, skills and training, safety, gender equality and productivity;

• $2.0 million over two years from 2023–24 to develop a targeted training package on workplace psychosocial hazards, to be provided to organisations that train health and safety representatives in the Commonwealth jurisdiction;

• $0.8 million in 2023–24 to conduct a review of modern awards in the context of new gender equality and job security objects and the updated modern awards and minimum wages objectives in the Fair Work Act 2009, the review will also consider opportunities to make awards simpler to use; and

• $0.3 million in 2023–24 for a specialist review into the operations of the Office of the Fair Work Ombudsman.

The Government is continuing its comprehensive consultation with stakeholders on the implementation of election commitments and Jobs and Skills Summit outcomes to close loopholes in the workplace relations system, including the Same Job, Same Pay principle, the regulation of employee-like forms of work, and legislating a fair, objective definition of casual employment.

The Government will also engage with stakeholders to explore the design and implementation of a national labour hire licensing scheme in Australia.

Employment and Workplace Relations – reprioritisation

The Government will achieve savings of $212.9 million over 5 years from 2022–23 (and $41.4 million per year ongoing) across the Employment and Workplace Relations portfolio which will be redirected to fund other portfolio policy priorities.

Savings include:

• $111.6 million over 4 years from 2023–24 by reducing place allocations for the Self-Employment Assistance Small Business Coaching program to more accurately reflect utilisation of places;

• $27.5 million over 4 years from 2023–24 by temporarily reducing uncommitted Industry Workforce Training program funding;

• $22.8 million over 4 years from 2023–24 by ceasing the Entrepreneurship Facilitators Program from 1 July 2023;

• $20.0 million over 4 years from 2023–24 by temporarily reducing uncommitted funding to support Job and Skills Councils;

• $15.8 million over 4 years from 2023–24 by reducing the departmental operating funding of the Office of the Fair Work Ombudsman by 2.5 per cent;

• $10.4 million over two years from 2022–23 by not proceeding with the Accelerating Australian Apprenticeships Pilot program;

• $3.9 million over two years from 2022–23 by rescoping the Skills Assessments Pilots to align with current demand trends; and

• $1.1 million in 2023–24 by ceasing the Career Revive program on 30 June 2023

Training measures: Australian Skills

Guarantee

The Government will provide $8.6 million over 4 years from 2023–24 (and $1.5 million per year ongoing) to implement the Australian Skills Guarantee, ensuring one in 10 workers on major Australian Governmentfunded projects is an apprentice, trainee, or paid cadet.

The Australian Skills Guarantee will apply from 1 July 2024 to projects with contracts valued at $10.0 million or more in the construction and information and communications technology sectors and will include subtargets for women. More ambitious targets will be set for flagship construction projects with contracts valued at $100.0 million or more.

Targeted Support for Apprenticeships

The Government will provide additional funding of $54.3 million over 5 years from 2022–23 to introduce a new non-financial support model for Australian Apprenticeships from 1 July 2024. The model will redesign and refocus key support services currently delivered by the Australian Apprenticeship Support Network to increase apprenticeship completion rates and the diversity of the apprentice workforce.

Grant funding of $5.0 million over 3 years from 2024–25 will be provided to organisations with appropriate expertise in supporting women in the workplace, to further support women in historically male dominated trade apprenticeships. This will include providing education, advice or support to increase culturally safe and inclusive workplaces, reduce the cultural barriers to women’s participation, address workplace challenges and support businesses to attract and retain women. The new model will also provide support to women who commence their non-traditional trade apprenticeships prior to 1 July 2024 during their transition to new service arrangements.

This measure delivers on the Government’s commitment from the Jobs and Skills Summit to explore options to improve the apprenticeship support system and drive-up completions. It will also assist employers linked to major and flagship construction projects to meet their targets for apprentices and women under the Australian Skills Guarantee. The cost of this measure will be offset by savings achieved from streamlining Australian Apprenticeships Incentive System service arrangements by transferring the processing of wage subsidy claims from Services Australia to the Department of Employment and Workplace Relations and providers.

National Skills Agreement

The Government will provide $5.5 million in 2023–24 to continue supporting negotiations on a long-term skills funding agreement with the states and territories. Subject to the outcome of these negotiations, the

Government has also retained $3.7 billion in the Contingency Reserve for a 5-year National Skills Agreement that will commence on 1 January 2024.

National Careers Institute

The Government will provide additional funding of $5.1 million in 2023–24 to continue functions of the National Careers Institute and to evaluate its role in supporting Australians to access careers information. Funding will ensure the Your Career website is based on the latest labour market data and will continue the delivery of the School Leavers Information Kit to enable young people to make informed decisions about their education, employment, and training pathways.

Making more TAFE and vocational education places Fee-Free

The government will provide additional funding to states to subsidise existing training places, making these ‘fee-free’. This policy aims to reduce cost-of-living pressures for students enabling a greater number to complete their qualifications.

Business measures:

Small Business Support – $20,000 instant asset write-off

The Government will improve cash flow and reduce compliance costs for small businesses by temporarily increasing the instant asset write-off threshold to $20,000, from 1 July 2023 until 30 June 2024.

Small businesses, with aggregated annual turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter.

The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out will continue to be suspended until 30 June 2024.

Small Business Support – Small Business Energy Incentive

The Government will support small and medium businesses to save on energy bills through incentivising the electrification of assets and improvements to energy efficiency.

Small and medium businesses, with aggregated annual turnover of less than $50 million, will be able to deduct an additional 20 per cent of the cost of eligible depreciating assets that support electrification and more efficient use of energy. Up to $100,000 of total expenditure will be eligible for the Small Business Energy Incentive, with the maximum bonus deduction being $20,000.

A range of depreciating assets, as well as upgrades to existing assets, will be eligible for the Small Business Energy Incentive. These will include assets that upgrade to more efficient electrical goods such as energyefficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage. Full details of eligibility criteria will be finalised in consultation with stakeholders.

Eligible assets will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Eligible upgrades will also need to be made in this period.

Tax Integrity – improving engagement with taxpayers to ensure timely payment of tax and superannuation liabilities

The Government will provide funding over 4 years from 1 July 2023 to enable the ATO to engage more effectively with businesses to address the growth of tax and superannuation liabilities.

The additional funding will facilitate ATO engagement with taxpayers who have high-value debts over $100,000 and aged debts older than two years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth.

A lodgement penalty amnesty program is being provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system. The amnesty will remit failure-tolodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.

Driving Collaboration with Small Business to Reduce the Time Spent Complying with Tax Obligations

The Government will provide $21.8 million over 4 years from 2023–24 (and $1.4 million per year ongoing) to the Australian Taxation Office (ATO) to lower the tax-related administrative burden for small businesses.

Funding includes:

• $12.8 million over 3 years from 2023–24 to trial an expansion of the ATO independent review process to small businesses (with aggregated turnover between $10 million and $50 million) subject to an ATO audit. The trial will commence on 1 July 2024 and run for 18 months

• $9.0 million over 4 years from 2023–24 (and $1.4 million per year ongoing) for 5 new tax clinics from 1 January 2025 to improve access to tax advice and assistance for 2.3 million small businesses.

Eligibility for funding will be extended to TAFE institutions to improve access to tax clinic services in regional areas.

The measure also delivers reforms to cut paperwork and reduce the time small businesses spend doing taxes:

• from 1 July 2024, small businesses will be permitted to authorise their tax agent to lodge multiple Single Touch Payroll forms on their behalf, reducing paperwork for small businesses

• from 1 July 2024, small businesses will benefit from faster, safer and cheaper income tax refunds by reducing the use of cheques

• from 1 July 2025, small businesses will be permitted up to 4 years to amend their income tax returns, reducing the burden of making revisions.

Enhanced Support for Small and Medium-sized Businesses and Startups

The Government will provide $431.9 million over 4 years from 2023–24 (and $79.2 million per year ongoing) to improve support for small to medium enterprises (SMEs) and startups.

Funding includes:

• $392.4 million over 4 years from 2023–24 (and $68.2 million per year ongoing) to establish the Industry Growth Program to support Australian SMEs and startups to commercialise their ideas and grow their operations. Support will be targeted towards businesses operating in the priority areas of the National Reconstruction Fund

• $39.6 million over 4 years from 2023–24 (and $11.0 million per year ongoing) to continue the Single Business Service, supporting SMEs engagement with all levels of government. This measure replaces several programs established by the previous government.

GST compliance program – four-year extension

The Government will provide $588.8 million to the ATO over 4 years from 1 July 2023 to continue a range of activities that promote GST compliance. This measure is estimated to increase GST receipts by $3.8 billion, and other tax receipts by $3.8 billion, over the 5 years from 2022–23.

These activities will ensure businesses meet their tax obligations, including accurately accounting for and remitting GST, and correctly claiming GST refunds. Funding through this extension will also help the ATO develop more sophisticated analytical tools to combat emerging risks to the GST system.

This measure is estimated to increase receipts by $7.6 billion and increase payments by $3.8 billion over the 5 years from 2022–23.

Other measures:

Migration – uplift of Visa Application Charges

The Government will increase Visa Application Charges (VACs) from 1 July 2023. In addition to the regular CPI indexation, VACs will increase by 6 percentage points for visa applications, as well as an additional 15 percentage points for select visitor and temporary visa subclasses and an additional 40 percentage points for business innovation and investment visas.

The select visitor and temporary visa subclasses include visitor, working holiday, work and holiday, training, temporary activity, and temporary work (short stay specialist). The increased revenue generated will fund costs associated with improving visa processing and other Government priorities.

Visa and Migration System

The Government will provide $125.8 million over 4 years from 2023–24 to continue implementing outcomes from the Jobs and Skills Summit to strengthen the migration system in order to ease critical skills shortages across the economy and build a more productive workforce.

Funding includes:

• $75.8 million over two years from 2023–24 to extend the current surge in visa processing resources to ensure timeliness of visa processing and improve existing visa processing systems

• $50.0 million over 4 years from 2023–24 (and $15.3 million per year ongoing) for additional enforcement and compliance activities to maintain the integrity of the migration system. Funding from 2025–26 will be held in the Contingency Reserve, pending an evaluation of the effectiveness of the activities.

Incentivise pensioners into the workforce – six months extension

The Government will provide $3.7 million in 2023–24 to extend the measure to provide age and veterans pensioners a once-off credit of $4,000 to their Work Bonus income bank and temporarily increase the maximum income bank until 31 December 2023.

Under this measure, pensioners can earn up to $11,800 before their pension is reduced, supporting pensioners who want to work, or work more hours, to do so without losing their pension. There is expected to be a minor increase in personal income tax receipts in 2024–25 as a result of this measure.

SpecialTopic:Foreigninvestors:Friend orFoe

28,590. That was the number of new detached houses that commenced construction in the final quarter of 2022 in Australia. This would have barely qualified as a good quarter in the 1970s. Multi-unit commencements have also come a long way down. After an unprecedented apartment boom last decade, a series of taxes, restrictions and the loss of overseas arrivals during the pandemic has halved multi-unit commencements compared to six years ago, when foreign investment surcharges were introduced.

The total number of new homes being commenced across Australia is no better than the average of the last 40 years. And yet, there are almost 11 million, or 70 per cent, more Australians than there were in 1982. Net overseas migration has grown from around 110,000 per year in the early 2000s, to more than 300,000 following the re-opening of international borders. At the same time, a changing demographic composition has seen the average household size fall. Putting these factors together – a larger population, accelerating migration and falling household size – it is not hard to see why we have a shortage of housing in Australia.

DetachedandMultistarts:3Yearrollingaverage-AUS

Attracting more foreign investment to the housing market is one clear way of alleviating the housing shortage. Unfortunately, both state and federal governments have implemented a raft of regulations and taxes in recent years aimed at precisely the opposite.

In the 2017-18 Budget, the federal government introduced a range of measures aimed at limiting foreign ownership in new dwellings, the most significant of which was a 50 per cent cap on foreign ownership in new developments.

The objective of these measures was to ‘ensure that dwellings in new developments in Australia are kept available for Australians1’ – which is code for saying that foreign investment in housing displaces investment from Australians. Foreign investment had indeed surged in the years leading up to the 2017-18 Budget. But this surge was driven by several factors, such as planning changes, pent up demand from earlier population growth, the end of the resources boom and investment in Commonwealth Games housing, to name a few.

Importantly, even at the peak of foreign investment in 2016, foreign dwelling approvals (as reported by the Foreign Investment Review Board, or FIRB) accounted for less than 20 per cent of the total reported by the ABS. In other words, foreign investment is simply not sizeable enough to offset local investment.

1 https://archive.budget.gov.au/2017-18/glossies/factsheets/FS_16_Housing_Affordability.pdf

Source: ABS 8752, HIA

Surcharges introduced for NSW, VIC & QLD*

* NSW, VIC, QLD surcharges introduced in 2016; ACT, SA in 2018; WA in 2019; TAS in 2022

Further, the boom in foreign investment was mostly in off-the-plan apartments, whereas 70 per cent of Australians live in detached houses. And given that most bank lending is for owner occupiers rather than for investment purposes, the claim that foreign investment results in fewer dwellings being available for Australians simply doesn’t stack up.

ResidentialRealEstateApprovals

Fees and taxes imposed on foreign investors have also begun spiralling out of control. Foreign investors in all states (not including the NT and ACT) are now slugged with a 7 or 8 per cent stamp duty surcharge (over and above ‘standard’ duties levied on all transactions). While NSW, Victoria, Tasmania and the ACT also impose foreign surcharges on land tax equivalent to between 1 and 4 per cent of average land value.

Fees payable to the FIRB also doubled in 2022 to at least $13,200 on each transaction worth less than $1 million.

All this adds up. HIA estimates that an overseas investor looking to purchase a property in Sydney – by far the largest market – must pay $150,000 in stamp duty, land tax and FIRB fees, around three-quarters of which is solely through foreign surcharges. Altogether, stamp duty, land tax and FIRB fees account for between 15 and 20 per cent of the median dwelling price in major housing markets.

An ideal tax should be both efficient and equitable. Foreign investor surcharges on stamp duty and land tax fail both of these criteria. First, they create a wedge between foreign and domestic buyers, which distorts the market price and make them inefficient. Second, they exacerbate the existing inequities of stamp duty by further punishing ‘mum and dad investors,’ and add an additional level of inequity by forcing foreign buyers to pay more than domestic buyers.

FIRB fees are not quite as bad, and in fact aren’t technically considered a tax. However, the FIRB noted in its latest annual report that foreign investment application fees are likely to have contributed to a decline in foreign demand for residential real estate2. And that comment came before the doubling of fees in 2022, meaning the effect on overall investment will likely be larger now.

The cost of these surcharges is ultimately transferred to future renters and the wider economy. The net effect is less housing: either investors have to pay more for investment properties, which may deter them from entering the housing market; or builders will be forced to accept a lower sale price, which will discourage them from taking on new projects (or perhaps more accurately, lessen the appetite for banks to lend to them).

At a time when overseas arrivals are soaring, combined with longer term growth in a population which needs more houses per person, we need more houses to be built, not less.

Rather than preventing Australians from entering the housing market, greater foreign investment will lead to more activity in the market, which ultimately will mean more houses being built. That’s a win-win for future homeowners as well as the residential building industry.

SpecialTopic:Thefourstepsto improvingthesupplyofhomes.

After decades of debate, the shortage of housing stock has reached an acute level that leaves all but a few academics in unanimous agreement that supply is the key to the housing and rental market problem. A healthy housing market is one with around 5 per cent rental vacancy. At this point, renters have options to consider when looking for rental accommodation. House prices won’t be driven by speculative investors and the pressure on the public housing stock won’t be driven up by working families needing assistance.

The reasons why Australia has under-supplied homes for decades revolves around a systemic failure of government. Even one million homes added to the housing stock over the next five years will not appease the demand for homes. The pathway out of this crisis will take at least a decade.

But the solutions are relatively simple. They include:

• First do no harm.

There are few items in our economy that are more heavily taxed than new homes. There is a long list of taxes, fees and charges imposed on new home building from Stamp Duty through to a ‘temporary levy’ imposed to recover the cost of the HIH collapse in 2001. Governments tax tobacco to impede its consumption, and by taxing new homes, they achieve the outcome of building fewer homes.

Property is an important component to the tax base, but the way it is taxed warrants reform as the burden falls disproportionately on new supply. Redirecting this tax base to more efficient, broad based taxes, will ease this burden on those looking to build a new home.

But taxes are just a component of the increased costs. Even in 2023 additional costs are to be imposed on new housing despite evidence that they do not provide a net public benefit. Ensuring wheelchair access and energy efficiency are worthwhile goals, but these costs are paid for with higher weekly rents for all renters. Regardless of the merit of these regulations, by increasing the cost of new homes, supply declines.

For this reason, given the acute shortage of housing stock, the advice to policy makers at all tiers of government, is stop making new homes more expensive. It only makes the problem worse.

• Attract more investment, especially to apartments.

Owner occupiers, especially first home buyers, have been forced away from ownership by increasingly restrictive lending regulations. These restrictions have been ramped up over the past 15 years despite a lack of evidence that there is a problem with mortgage delinquency in Australia. This has resulted in reduced competition for lending to first home buyers and those with less than a 20 per cent deposit. This further reduces the pool of investment for new home building.

State and federal governments have worked cooperatively to force foreign investors from investing in building new apartments across Australia, despite them not being able to compete in the established home market. Foreign investors can only build new ones. Their exit from the market is a key reason apartment supply is contracting.

Australia is building roughly the same number of detached homes now as it was in the early 1980s despite an extra 10 million people. The number of apartments commencing construction is now half of the number commenced in 2016.

Despite this, there are also proposals to tax domestic investors, or restrict short term rentals, all of which would restrict the supply of housing. Apartment construction remains the cheapest, fastest option, to increase the stock of housing in locations where there are stable and reliable employment opportunities.

• Improve capacity

The building industry is suffering from a structural and cyclical capacity problem. Shortages of skilled labour have persisted in hampering the industry for much of the past 20 years. The pandemic added a cyclical component to this problem by denying access to overseas labour and leading to an unprecedented increase in demand for homes. The increase in demand is due to a change in consumer behaviour toward lower density living.

Supply chain disruptions through the pandemic have added to the cost of construction, but this is not the only problem with supply. Record levels of expenditure by government on infrastructure projects are also absorbing available resources and forcing up prices for materials and labour.

The rise in the cash rate will see home building slow and ease some of the labour and material shortages, in 2024. A global recession would also add a ‘push factor’, where skilled workers in other economies are unemployed and seeking to relocate. But the structural problems will remain.

The industry does need to attract, train and retain more workers. Material prices will stabilise, but above the pre-pandemic costs.

But, attracting investment into building manufacturing capability in Australia requires low and reliable energy costs, a stable business environment and a competitive labour market.

• Stable and reliable migration

The building industry has consistently sought stable and reliable migration to ensure that there is a growing workforce in Australia (the industry is a large employer of recent migrants) and stable demand for new homes. Two years of closed boarders wasn’t sufficient time to allow the supply of housing to increase to meet demand. This has been followed by a ‘catch-up cycle’ with record levels of migration. This is the lesser of the two evils. The boost to the population does have significant economic benefits including helping to restore the budget to surplus, easing labour shortages, ensuring ongoing economic growth, jobs, and offsetting the ageing population. But there is a very large price: housing affordability. The industry cannot build sufficient homes to meet this population growth, given the constraints. A return to stable and reliable economic settings, including population growth is necessary to address the acute shortage of housing supply.

Conclusion

Governments have many conflicting goals, but if they are going to increase the population, they are also obligated to take all measures to reduce the cost of new homes, improve capacity and attract more investment.

The Housing Australia’s Future Bill that failed to pass Parliament at the last sitting aims to address the affordability problem. It is not in itself a solution to all the challenges but if passed it will improve the quality of housing data, coordination across state and local governments and increased investment in public housing. These are necessary steps to addressing the supply shortage in the long term.

WorldEconomy

Global Dynamics

• Global economic growth is slowing under the weight of rapidly rising cash rates across developed economies.

• Inflationary pressures are sticky but slowing.

• This should ease inflationary pressures in Australia.

Forecasting global economic growth is a fool’s errand at the best of times. And we are very much not in the best of times – the global outlook is increasingly uncertain. A combination of factors could drag the world economy back into recession. This isn’t all bad news for Australia, as a global recession is likely to erode inflation faster than it erodes demand for Australian exports. Below we discuss what we see as the main drivers affecting the global economy, and through it Australia.

Coming out of COVID

For one thing, economies around the world are still coming out of a one in 100-year pandemic, which shut borders, forced a massive rise in unemployment (or for those lucky enough to keep their jobs, a massive shift in ‘normal’ work practices, with working from home no longer the ‘exception’ but rather now the ‘rule’). Most relevant for Australia, China has only very recently ended its strict lockdowns.

The immediate effect of COVID was on production, as firms around the word shut up shop in response to the pandemic. The medium-term effect was a result of the stimulus packages introduced in response to falling economies. The longer-term effect is less straight forward and likely reflects some broader attitudinal or workplace changes. For example, to the extent that working from home is now more common, that will likely have longer term effects on the office rental markets in capital cities, as well as potentially the housing market.

Financial market turmoil in the US

Finally, the collapse of Silicon Valley Bank in the US in March led some to fear we were on the cusp of a ‘GFC mark 2’. It was precisely this sort of contagion – where one bank collapses triggering a flurry of similar collapses – that precipitated the trouble with Lehman Brothers back in 2008, and hence a similar concern was by no means unreasonable.

This complicated matters for Central Banks, because whereas the first two factors – COVID affected supply shortages and the Russia-Ukraine war – led to higher inflation and thus a need for tightening monetary policy, the potential for a large-scale banking collapse would, ordinarily, generate a loosening, not a tightening of monetary policy.

The US Government moved quickly to guarantee all deposits, and this swift action appears to have prevented the collapse of Silicon Valley bank from having a broader systemic effect. Australian banks never really faced much of a risk, but they certainly haven’t been harmed by better macro-prudential regulation at a global level.

War in Europe and the effect on commodity prices

Russia’s invasion of Ukraine has added to already strong inflationary pressures, most particularly in Europe, but given the globalised nature of today’s economy, here as well. The effect of this has been multi-pronged. To some extent, the invasion has boosted the price of some of Australia’s exports, especially in energy exports. Given that bans in most advanced Western economies of Russian energy exports have now come into effect, the Bureau of Resources and Energy Economics expects the price of energy commodities to remain elevated across the forecast period.

More broadly though, it has led to significant uncertainty in Europe, leading to a downward revision to the IMF growth projections. World GDP in 2023 is now expected to be 2.8 per cent (down from 3.4 per cent in 2022), and growth in advanced economies is expected to be especially slower, from 2.7 per cent in 2022 to 1.3 per cent in 2023.

Inflationary pressures are slowly beginning to recede but likely to prove sticky

The immediate term response across the world has been through tighter monetary policy. This leaves governments in a tricky position though. It might be tempting for them to use expansionary fiscal policy to

boost potential growth, but they also have to be conscious of the risk that in doing so they might simply spur further inflation, exacerbating the cycle. Higher inflation is also correlated with lower unemployment, which further adds to overall spending.

The Global Financial Crisis in 2008 began with a demand shock (i.e. a reduction in global demand). This time around, it began with a supply shock (i.e. a reduction in global supply brought about by the pandemic). When demand is low, it is fairly easy to see how a reduction in the cost of money (interest rates) will spur additional spending. But when supply is low, the effectiveness of monetary policy is far less straightforward.

The main challenge going forward is to ensure that inflationary expectations do not get out of hand: as soon as people begin to expect inflation to rise, they will bring forward their spending and demand higher wages, which will in turn bring about the expected inflation. Central Banks these days increasingly consider inflationary expectations in determining the policy rate, meaning the longer inflation sticks around the more likely it is to become entrenched.

The chart below shows the IMF’s most recent inflation forecasts for Australia compared with other major economies and the Euro Zone. Inflation across the world is generally expected to recede through 2024 as commodity prices fall, but the IMF’s expected trajectory is noticeably less optimistic than the Treasury’s forecasts in the 2023-24 Budget

Growth forecasts are equally grim

The chart below compares the IMF’s most recent forecasts for Australia with that of the US, Euro Area and G7. Growth prospects across the developed world are expected to sour for 2023 and 2024 as inflation and interest rates remain high leading to a dampening of consumer spending and investment.

Australia is expected to fare relatively better than other major economies across the outer years. This is partly because we are more exposed to China and less exposed to Europe than other major economies, though it is striking that Chinese growth is projected to stabilise at around 4 per cent a year over the coming decade, around half the rates it’s previously seen.

The IMF noted in its most recent outlook:

A return of the world economy to the pace of economic growth that prevailed before the bevy of shocks in 2022 and the recent financial sector turmoil is increasingly elusive. More than a year after Russia’s invasion of Ukraine and the outbreak of more contagious COVID-19 variants, many economies are still absorbing the shocks. The recent tightening in global financial conditions is also hampering the recovery. As a result, many economies are likely to experience slower growth in incomes in 2023, amid rising joblessness. Moreover, even with central banks having driven up interest rates to reduce inflation, the road back to price stability could be long. Over the medium term, the prospects for growth now seem dimmer than in decades

Source: IMF

NationalEconomy

Short term gains but still long-term pain

• Short term inflation has caused a temporary budgetary windfall owing to a lesser real value of debt payments and higher than expected commodity prices.

• But the long-term fundamentals remain negative, and there’s a risk that recent rises in the cash rate turn out to be too much too soon.

• Going forward, population is expected to be faster than previously thought which, combined with an apparent trend to declining average household size, is expected to make the challenge of building enough houses even more pressing

Short-term bouts of inflation can do wonders for a government’s Budget position. For one thing, as commodity prices rise, so too does government tax revenue. The Government has also benefitted from the simple fact that its previous commodity forecasts were infeasibly low, meaning the updated commodity forecasts are themselves a budget sweetener. And of course, by enabling debt to be paid back in depreciated dollars and by boosting the nominal value of national income, Russia’s invasion of Ukraine has provided a short-term boost to the Government’s fiscal position. Finally, high inflation has been accompanied by historically low unemployment, further boosting government tax revenues.

Given all of this, it is little wonder then that the Treasury expects a budget surplus of $4.2 billion for 2022-23, before once again returning to deficit in the outer years as the short-term benefits associated with high inflation wear off and longer-term negative factors begin to take focus. Reflecting these factors, real GDP growth for 2022-23 is expected to be 2.25 per cent.

Both Treasury and the RBA continue to forecast a slowing in GDP growth in the coming years. As the RBA noted in its most recent Statement of Monetary Policy released in May:

Growth in Australian economic activity is expected to have slowed in the March quarter and is forecast to remain subdued through this year as higher interest rates, the higher cost of living and earlier declines in household wealth continue to weigh on growth.3

And as the Treasury noted in the May Budget:

But the economy is not immune to the global slowdown and there are clear signs that domestic demand is responding to higher interest rates and other cost-of-living pressures. This slowing was expected in the October Budget, but has materialised slightly earlier than anticipated, with consumers and the housing sector most exposed.4

GrossDomesticProduct,quarterly

3 https://www.rba.gov.au/publications/smp/2023/may/economic-outlook.html

4 https://budget.gov.au/content/bp1/download/bp1_2023-24.pdf

The main short-term risk to the economy is not inflation but the cash rate

As we have noted previously, probably the biggest near-term risk to Australia’s economic outlook is that the consistent hiking of the cash rate proves too much, and that the RBA’s rate hiking cycle ends up generating the very recession they’re trying to avoid.

To be clear, the cash rate remains low by historical norms, and there are a number of long-term factors which suggest cash rates will continue to trend down once the current bout of inflation is past. Most significantly, an ageing population will lead to more savings (either through superannuation or personal savings), and an increase in aggregate savings relative to investment will put downward pressure on interest rates.

But while a lot of people are quick to point out that the cash rate today is still lower than in the ‘90s, and it is, it’s also something of a moot point. People make spending decisions based on their current and expected future circumstances; it doesn’t matter what interest rates were 20 years ago. What’s more relevant for peoples’ spending behaviour is that the cash rate has not undergone this rapid a tightening cycle since inflation targeting was introduced in the early 1990s.

Given how much the average house price has grown, total interest costs are absolutely significant on a historical basis: house prices have grown roughly tenfold since 1990, while the size of the nominal economy has grown only two and a half times, meaning 15 per cent interest on a home in the 1990s would be expected to account for a greater share of a person’s income than 5 per cent interest on a home today. And in any case, a sizeable share of people in the housing market today will not have experienced the high interest rates that were the norm pre GFC and will therefore be very much feeling the crunch of higher interest rates.

RBAOvernightCashRate

Monetary policy vs Fiscal policy

The current inflationary environment is a result of broader supply chain issues. Using the cash rate as a response to this inflation is a sledgehammer approach, as it is only more effective in controlling demanddriven inflation.

In defence of the RBA, they are simply using the only tool in their arsenal – the cash rate – in an attempt to meet their strict mandate of keeping inflation steady at 2-3 per cent. They are often not helped by a government that has a temptation to spend, even though that spending might in itself be inflationary.

While there wasn’t much in the most recent Budget, there were enough spending announcements to allow us to view their target of inflation returning to just over 3 per cent in 2023-24 with some scepticism, especially given that such a good chunk of inflation recently has been imported via higher commodity prices. If the government isn’t going to contribute to the inflation fighting efforts, the RBA may then feel like it has little choice but to raise rates further.

This conflict between monetary policy and fiscal policy is one that has become especially pronounced in recent times, and it may warrant a broader re-think of how the two might better work in synch. The RBA’s inflation targeting mandate hasn’t really been reviewed since it was introduced in the early 1990s. Given how much times have changed since then, it seems entirely reasonable to suggest inflation targeting is no longer up to the task and to wonder what alternatives might be available.

Population is the main driver of economic growth

Economic growth can be thought of in terms of the ‘three P’s’: population, participation and productivity.

Over the longer term, scarcity of the main factors of production – land, labour and capital – will mean that the most sustainable sourced of growth is productivity. In other words, we need to get more output per unit of input.

Practically speaking, population has historically been the dominant factor. Given the most recent data from the ABS, population seems set to be going forward. Australia’s population grew by 1.63 per cent in the year to September 2022, well up on its 10-year average of 1.36 per cent.

The chart below shows Australia’s population trajectory under both of these growth assumptions. If growth continues at 1.6 per cent, then by 2033 there’ll be approximately 900,000 more Australians adding to the demand for housing than if growth continues at 1.4 per cent.

Migration is an increasingly important driver of population growth

As shown below, net overseas migration has accounted for an increasing share of Australia’s population increase.

From an economic perspective, this is great news. Migrants often arrive in Australia during the prime of their working lives, they generally arrive with an existing education, and skilled migrants arrive when they are already employed. Migration is an almost unambiguously positive element for Australia’s economy. We just need to make sure we have enough houses for them.

From a housing perspective, it’s important to note that people born in Australia tend to have very different housing characteristics than people not born in Australia. Based on data from the 2021 Census, around 80 per cent of Australian citizens lived in a separate house and 9 per cent lived in a flat or apartment, only 60 per cent of non-citizens lived in a separate house and 25 per cent lived in a flat or apartment.

The important point to note here is simply that in planning for the future dwelling needs of our population, we need to be conscious of where people want to live. Not only might this affect peoples’ willingness to come to Australia in the first place, but different housing characteristics will likely also bring with them different skill needs – it takes a different mix of trades to construct multi-unit apartment blocks then it does a single detached house, for example.

Australia's Population Growth by Component - Moving Annual Total

Source: ABS 3101.0

On average we will need more houses per person

Another factor worth considering is average household size. Other things equal, a fall in household size will mean more households are being formed, contributing to the demand for housing. It is not ground-breaking to say that household sizes are falling; they have been across much of the developed world. This is largely due to the simple fact that as average incomes rise, fertility rates tend to fall.

Recent analysis from the RBA has used data from the labour force survey to derive an estimate of average household size. The new approach allows not just for a far timelier estimate of average household size to be derived, but also allows estimates of average household size to be generated at an individual city level.

The RBA’s new estimate of average household size generally agrees with the downward trend from the Census, and in fact suggests that the true figure may indeed be less than previously thought. Put another way, we need more houses to accommodate the same number of people. The RBA paper estimates that a decline in average household size of the magnitude observed between early 2020 and September 2021 would be associated with an increase of around 120,000 households

AverageHouseholdSize

HIAForecasts

Dwelling Commencements

• Multi-unit starts have stalled under the weight of the rising cash rate, and regulatory and construction costs.

• A strong economy, low unemployment and enormous pent-up demand continues to be impeded from converting to new home construction.

• A policy catalyst is needed to convert the market’s strong fundamentals into home building.

Australia’s housing markets are faced with exceptionally strong underlying demand, driven by low unemployment, high population growth and fewer people per home. At the same time, the rapid increase in the cash rate has compounded the barriers created by extraordinary macro prudential restrictions, rising regulatory costs and rising construction costs. The combination of these forces is leading to a slowdown in work entering the pipeline.

The constraints imposed on the market by governments, local, state and federal (RBA/APRA), are causing the volume of work entering the pipeline to contract sharply, from the record levels observed this time last year. But there remains a significant volume of work on the ground, still to be completed. This will ensure that home building doesn’t drag on economic growth, at least, in the first half of 2023.

This is creating pent-up demand for housing, as seen through rental price growth and vacancies, that will lead to a recovery in home building, when the government, RBA and/or regulators step back from constraining activity.

The increase in pent-up demand is most acute among higher density multi-units where the opposing trends of migration and rising costs are colliding.

Cost pressures driven by rising regulatory costs, compounded by supply chain constraints and labour shortages, have seen the volume of units commencing construction stall. This is contrary to what was anticipated a year ago, when rising rates, rising house prices and a return of migration was expected to see a shift in demand from detached homes back to more affordable multi-units.

The phenomenal return of overseas migrants, students and tourists – people who tend to favour higher density living more than the broader population – is going to add significantly to this demand for units, townhouses and apartments, especially in the larger capital cities

NetOverseasMigration,Australia

The supply constraints that have held back home building over the last few years are also heading in the right direction. Home building materials are easier to obtain, and price increases have slowed. Labour constraints have proved more persistent but the return of overseas workers and a slowdown in building will ease labour costs this year.

The average Australian household is still in a good financial position. Households are still adding to their vast war chests of savings and assets, especially with the recent return of dwelling price growth. And almost everyone is still employed, which should ensure the number of Australians defaulting on their mortgages remains at incredibly low levels.

This really should be encouraging our ‘unquestionably strong’ financial sector to happily lend to new home buyers.

But this is not happening.

Since the RBA started increasing interest rates last May, new home sales have dropped significantly. Since the same time last year, they are down by almost 50 per cent, and this is before the most recent rate increases have even affected the market. Consequently, there is no indication that the market has reached any kind of turning point yet.

On top of this, for every three new sales that builders are recording each month, an earlier sale is being cancelled. Banks are increasingly unwilling to lend the required amount to home buyers in light of the increase in interest rates.

This erosion of market confidence and squeezing of home buyers is compounding the increase in construction costs that has already occurred. Changes to the construction code will add to these costs.

The effect is fewer people are buying houses and less building work is entering the pipeline. This combination of falling sales and increasing cancellations is eroding the pipeline of home building work accumulated during the pandemic. From mid-2023 work on the ground will slow.

The result is that commencements of multi-units are around half of their volume from just six years ago and detached house starts are on the way down to an expected decade-low trough. This fall in commencements of units is most evident in the Sydney and Melbourne markets where migration is at its highest

PrivateNewHouseSales-Australia (SEASONALLYADJUSTED)

HIAForecast-Australia

The problem is not on the fundamentals side – it’s on the policy side. And there is a long list of policy options that could ensure Australia’s builders have a solid pipeline of ongoing work to sustain them, and that Australian home buyers don’t face ever-deteriorating affordability conditions.

Interest rates. Market confidence remains impaired by the expectation of further rate increases as potential home buyers wait to see the end of this rate rising cycle. A declaration that interest rates have peaked, even without a commitment to cut rates, would be enough to restore some confidence to the market.

Macro-prudential regulations. The easing of capital requirements on banks, or the 3 per cent serviceability ratio on new home buyers, would allow first home buyers and others with lower incomes and lesser deposits to return to the market. The risks to the financial sector are minimal in the face of record low mortgage default rates and our ‘unquestionably strong’ financial sector.

Government taxes and restrictions. The abolition of punitive stamp duties on foreign investors would encourage greater investment in new housing supply, especially multi-units where supply can be improved quickly. Easing planning restrictions that place height and density limits on new housing in existing suburbs could also catalyse new development.

New home construction will remain constrained until there is a policy catalyst to restore market confidence.

Detached houses

Detached house commencements in the final quarter of 2022 fell by 0.4 per cent to just shy of 28,900. This was the weakest quarterly performance in over two years, though still produced one of the strongest annual figures on record of 119,920 commencements for the 2022 calendar year.

Commencements are forecast to continue downwards into the second half of next year under the weight of higher interest rates. This would produce a decline of 9.4 per cent in 2023 and 11.3 per cent in 2024, reaching an annual trough of just 96,310 – the weakest year since 2012, the last time the RBA drove down the housing market with a rate hiking cycle. A modest 1.6 per cent recovery in 2025 is expected followed by a stronger recovery of 7.5 per cent and 5.5 per cent, reaching 110,980 in 2027.

Multi-units

Constrained by regulatory and construction costs, multi-unit commencements stalled in the final quarter of 2022 to be 62.4 per cent lower than their peak in March 2016 with just 12,750 starts. This is the weakest quarter in over a decade and produced an annual total of just 63,240 commencements for 2022, a decade low.

Supply constraints are expected to continue to hold back the sector this year, with commencements increasing by just 6.6 per cent to 67,430, before mounting a steeper recovery on the back of strong fundamentals in 2024. Multi-unit commencements are forecast to increase by 23.8 per cent and 11.6 per cent, reaching 93,170 in 2025, before peaking at 94,030 in 2026.

Source: HIA Economics

NewHousingForecast,byType,AUSDwellingStarts

Source:

Renovations Activity

• Supply constraints have held back renovations activity, similar to the new build market.

• Pandemic trends and extreme weather events will still sustain elevated demands for renovations activity going forward.

• Demand for renovation work is expected to moderate later in the decade

Renovations activity was weaker than expected in the second half of 2022, declining by 3.1 per cent and 4.1 per cent in the last two quarters to finish the year at $10.6 billion in the final quarter. This is the weakest quarter in two years, with the renovations sector being held back by labour and materials constraints in a similar manner to the new home market.

Nonetheless, this still produced $44.8 billion worth of renovations activity in the 2022 calendar year, down by 3.9 per cent from 2021 peak, and the second highest year of renovation work on record. This is forecast to be followed by a series of small moderations in the coming years as demand slows under the weight of higher construction costs, higher borrowing costs and a shadow of demand following the pandemic boom. The easing of supply constraints in 2023 will not be sufficient to offset a further decline in renovations work in 2023 with a 3.1 per cent decline forecast. Ongoing modest annual contractions in expenditure on renovations are anticipated with a 2.1 per cent, 1.2 per cent and 0.1 per cent annual decline forecast, to a trough of $41.9 billion in 2026. This will see spending higher than any year before 2021. From this low point, a recovery is expected as ongoing population growth and economic activity drive underlying demand with a 1.1 per cent increase expected in 2027.

The pandemic trend towards space and amenity drove a desire to expand and improve existing houses, in the same way that it drove many into entirely new larger homes. The accumulation of pandemic savings, and stimulus from governments and the RBA, aided these demands. Among other things, it led to homeowners renovating their bathrooms earlier than normal. Over the course of the pandemic, the average age of a pre-renovation bathroom fell from around 17 years to less than 14 years. People were also adding higher end finishes and appliances to their kitchens. In a boom dominated by owner-occupiers, rather than investors, it is perhaps unsurprising that people chose to spend the extra money on accelerated and higher end renovations that they would get to enjoy themselves.

The far more modest declines expected, as compared to the new home market, reflect the ongoing effects of these pandemic trends and weather-related damage. In addition, renovations tend to be more affordable than entire new homes, depending on the ambition and budget of the renovator. Rising interest rates, recent construction cost blowouts, and construction code changes, are making ‘affordability’ all the more important. This should shift more demand to renovations over new builds, which is why activity in the former is forecast to remain so elevated.

Later in the decade, it is expected that homes built in the late 80s and early-to-mid-90s booms will have been renovated. This means the volume of homes in those 30+ year prime renovation age brackets will shrink and underlying demand for renovations may moderate as we approach 2030.

It will be crucial to observe any new trends and developments in how Australians are using their homes after the pandemic, to forecast demand for renovations later in the decade.

The above data refers to ‘real’ activity, having been adjusted for the inflationary impact of rising construction costs. During a high inflation environment, it is important to note the difference between such ‘real’ measures, and their ‘nominal’ counterparts.

During the pandemic, specifically since the second half of 2020 when activity started ramping up and cost pressures started emerging for the industry, the gap between these metrics widened. Even as quarterly ‘real’ activity has been cooling since late 2021, ‘nominal’ activity has continued upwards. The final quarter of 2022 was the first time in two-and-a-half years that the nominal value of renovations activity declined. This could be indicative of easing cost pressures finally reaching the renovations sector.

RenovationsActivityIndex,NominalvsReal

Source: ABS

In real terms, renovations activity nationally is expected to moderate from its 2021 calendar year peak of $46.6 billion, down by 2.2 per cent to $45.5 billion in 2022, followed by further declines of 4.1 per cent and 3.0 per cent to $42.4 billion in 2024

HousePricesandRentalMarkets

• House and unit prices look to be recovering, although growth remains anaemic on an annualised basis.

• Prices have started to stabilise after the highs of 2021-22 with a smaller quantum of deviation in the monthly house price index over the last 12 months

• On an annualised basis, prices continue to disappoint, with the house index 9.5 per cent down on its corresponding value in April 2022, and the unit index 5.2 per cent down

CoreLogic’s house price index fell ever so slightly, down by 0.1 per cent in April 2023 compared to the month earlier, although this was on the back of a 0.1 per cent increase from February to March, leaving the index a fraction higher over two months. Unit prices rose by 0.2 per cent in April, on the back of a 0.3 per cent increase from February to March.

These dwelling price gains were driven by the capital cities, but the regions look to be approaching a trough their own price cycle.

On an annual basis, both capital and regional dwelling prices are still down significantly from last April, down by 8.4 per cent and 6.9 per cent respectively. Importantly though, the market appears to be turning a corner, suggesting a period of growth could be on the cards.

One thing that could upset this transition is the most recent rate rise on 2 May, which generally caught the market by surprise and might cause people to think twice about taking out a home loan.

That said, housing decisions are also influenced by where people think rates are headed in the medium term

say 18 months or 2 years from now – meaning that so long as people expect rates to gradually fall over the next couple years the effect of the most recent rise on dwelling prices may be muted.

The number of new listings so far has trended lower in 2023 than in 2022, while at the same time the volume of sales looks to have stabilised. Other things equal, this could provide upward pressure on prices in coming months, as a growing number of buyers have to compete for a dwindling number of new listings.

Evidence points to continued strength in house and unit prices, as supply is outmatched by demand on the back of record overseas arrivals and ongoing tightness in rental markets. The main risk to this outlook is interest rates. The RBA’s most recent statement noted that further tightening may be on the horizon, and the more they raise interest rates the greater the downside risks to housing prices.

The strong performance in both house and unit prices was mostly driven by growth in the Sydney market, where house prices rose by 1.5 per cent in the last two months, and unit prices also rose by 1.5 per cent. In contrast, house prices across Australia grew by just 0.1 per cent over the last two months, while unit prices continued down by 0.4 per cent

Average rents for units grew strongly across all capital cities, especially the larger ones, reflecting strong migration and a gradual return to the workplace for CBD employers. This also could bode well for future price growth, as higher rents raise the attractiveness of property relative to other types of investment.

MonthlygrowthinHouseValues-Australia

ChangeinHouseValues-3monthsto Source: CoreLogic

April2023

MedianWeeklyAskingRents-MarchQtr2023

ConstructionCosts

Increases in input costs continue to filter through home build process

• The average value of an approved house has increased by 14.8 per cent through the year, from $391,000 in February 2022 to $449,000 in February 2023.

• The rate of growth in the prices of home building inputs peaked at 17.3 per cent in June 2022. Meanwhile, the rate of growth in outputs prices peaked in September Quarter 2022 at 20.5 per cent against the same time the previous year.

• The rate of change in the price of home building inputs has increased by 32.2 per cent before the start of the pandemic in the December Quarter 2019 to the March Quarter 2023. This same rate for the same period for home building outputs has also risen by 35.1 per cent.

• Trades availability in the March Quarter 2023 have improved with the return of skilled migration. The prices of skilled trades have gone up 7.2 per cent against the same quarter last year.

There has been a 34.8 per cent increase in the average value of approved houses over the period starting December 2019 to February 2023, up from $333,000 to $449,000. This is consistent with the rate of change seen in the price of outputs, which has risen by 35.1 per cent in the same period.

AverageValueofHousesApproved,Australia

Based on the latest data for the Producer Price Index (PPI) as of March Quarter 2023, the quarterly growth rate of inputs and outputs continues to grow, albeit at a slower rate than their peak in June Quarter 2022. Driving this was the increase in construction input prices, with the index for the price of home construction materials, not including labour, up by 32.2 per cent between pre-pandemic to the March Quarter 2023.

HouseConstructionPriceIndices,QuarterlyGrowthRates

All home building inputs have increased in price between the December Quarter 2019 (pre-pandemic period) to the latest March Quarter 2023. Notable inputs that have saw a large price increase over this timeframe are reinforcing steel (+59.0%), steel products (+46.7 per cent) and timber, board, and joinery (+40.9 per cent). The latest data for March 2023 shows that the growth in home construction materials prices increased by 11.4 per cent in the year to the March Quarter 2023. This is still feeding into the value of approved houses or the prices of home building outputs. The growth in the price of home construction materials has slowed down, but nonetheless, it remains significantly higher than the pre-pandemic growth rate. Similarly, in the United States, the increase in the price of construction inputs has slowed in March 2023, and it its 4.0 per cent lower than it was the year before.

HouseConstructionInputPriceIndex,AnnualGrowthRate

Source:ABS

This slowdown in input price growth is reflective of the unfurling of global supply chains. From its peak of more than $11,000 in September 2021, the Global Container Freight Index has gone back down to prepandemic levels, recently as low as $1,400. High container costs have lingered for long and partly fed into the prices of materials, as evidenced by the spikes seen during that period. This should see the growth in input prices slow down over time, but shipping prices remain still higher than before the pandemic.

WeeklyFreightosBalticIndex-Pricefora40-FootShipping Container

Source: fbx.freightos.com

Part of what has fed into the value of approved homes may also be attributed to the premium put on more space and better amenities by households. There was a perfect storm of rising demand for home improvements during lockdown, government incentives, and larger household savings put towards renovations or seeking bigger homes.

HouseConstructionInputPricesbyProduct,AnnualChange, March2023

HouseConstructionInputPricesbyProduct,AnnualChangevs PandemicChange,March2023

Terracotta tiles

Timber windows

Reinforcing steel

Structural timber

Electrical cable and conduit

Plastic pipes and fittings

Plywood and board Steel products

Sand Timber doors

Timber, board and joinery

Steel beams and sections

Insulation

Copper pipes and fittings

Electrical equipment

Aluminium windows and doors

Mirrors and other glass

Sheet metal sanitaryware

Metal garage doors

Ceramic products

The cost surge in materials was not anticipated, which meant fixed price contracts were no longer profitable because builders had to bear these costs. We could see cost buffers surge as builders eventually incorporated healthier margins into new projects. As the input price surge slowed down, so have output prices, reflective of cost buffers having caught up to costs.

Skilled trades improve but remain in high demand

The price of skilled trades saw an increase of 20.9 per cent during the pandemic from the end of 2019 to early 2023. This price also had a hand in the increase in the value of homes. As home building activity surged during the pandemic, the availability of skilled tradespeople was constrained by the closure of international borders.

This feeds into home prices while builders struggle to complete homes, some of which were started over a year ago. There were 83 per cent more detached homes under construction in Australia at the end of 2022 than there were at the end of 2019. Such demand for new homes has trickled into the value of houses amidst the shortage of labour and higher land and materials prices.

The availability of skilled trades has improved over the year, with the HIA Trades Availability Index softening from a peak shortage of -0.92 in June 2022 to -0.75 in March 2023. All trades have seen an improvement in availability, in almost all capital cities and regions.

This still means there is an acute shortage of trades, one of the worst since HIA started this Report in 2003. The reopening of international borders has helped ease some of the labour shortages in skilled trades, with the price of trades slowing in recent quarters to rates much more comparable to – even lower than – those seen before the pandemic.

Source: ABS

LeadingIndicators

• Sales of new homes in the March Quarter 2023 were 45.9 per cent lower than in the same quarter the previous year.

• The value of loans has fallen by 5.0 per cent in March Quarter 2023 compared to the previous quarter.

• Building approvals for detached homes have decreased by 9.9 per cent to the March Quarter 2023 while multi-units are 33.7 per cent lower compared to the previous quarter.

New Home Sales

The number of new homes sold decreased by 9.4 per cent in the March Quarter 2023 compared to the December Quarter 2022. This leaves sales 45.9 per cent lower than at the same time the previous year. Over the last year, the three largest states, New South Wales, Victoria, and Queensland, have driven the declines. Only Western Australia saw new home sales figures increase compared to the year before.

PrivateNewHouseSales-Australia (SEASONALLYADJUSTED)

Housing Finance

Whether it’s first-home buyers, owner-occupiers, or investors, both the number and value of loans that banks approve have fallen across the board in the March Quarter 2023 The data also shows that the value of loans across all market segments (investors, first home buyers, and other owner occupier) remains in decline after a peak in the March Quarter 2022.

The number of loans for the purchase or construction of new dwellings for owner-occupiers fell by 16.9 per cent during the March Quarter 2023 compared to the preceding quarter. This leaves the number of loans at 33.8 per cent below the same time the previous year and at their lowest level since 2008.

Source: HIA New Home Sales Report

LendingforConstructionandPurchaseofNewDwellingsAustralia

Housing finance – key figures

• The number of loans for the purchase of residential land in the March Quarter 2023 was 19.3 per cent lower than the previous quarter. There were 23,994 loans issued for residential land between April 2022 to March 2023, which is 29.8 per cent lower than in April 2021 to March 2022 (34,161 loans).

• The number of loans for existing dwellings for owner-occupiers (excluding refinancing) fell by 15.1 per cent in the March Quarter 2023 compared to the previous quarter. There were 263,689 loans issued in this category between April 2022 to March 2023, compared to 334,693 loans in the same period the year before, decreasing by 21.2 per cent

• The value of loans to investors (excluding refinancing) declined by 5.3 per cent in the March Quarter 2023 to $23.4 billion. In the twelve months to March 2023, this value fell by 10.9 per cent to $107.3 billion compared to $120.5 billion in the same period last year.

• The number of loans to first home buyer owner-occupiers fell by 17.9 per cent in the March Quarter 2023. There were 102,373 loans issued in this category in the year to the March Quarter 2023, falling by 30.7 per cent from 147,665 in the same period the year before. The value of loans in this category was $22.5 billion in the March Quarter 2023, falling by 6.8 percent from $24.1 billion in the previous quarter.

ValueofloanstoOwneroccupiersandInvestors

FinanceforMarketSegments

Mar2023QtronMar2022Qtr

AustraliaFirstHomeBuyers

Building approvals

Total approvals decreased in the March Quarter 2023 by 19.7 per cent compared to the previous quarter. This consisted of a:

• 9.9 per cent fall in detached house approvals, and

• 33.7 per cent fall in the number of multi-unit approvals.

BuildingApprovals-Australia

Detached House

Multi Units

There was a total of 24,857 detached homes (seasonally adjusted) approved for construction in the March Quarter 2023, which is 9.9 per cent lower than in the December Quarter 2022 (27,573 homes). This figure has seen a significant downturn since peaking in the March Quarter 2021 at 40,990 detached home approvals.

ApprovalsforDetachedDwellings

Semi-detached dwellings approvals in the March Quarter 2023 (5,976) were down by 16.8 per cent compared to the previous quarter (7,181) to be 28.6 per cent lower than the March Quarter 2022 (8,371).

ApprovalsforSemi-DetachedDwellings

Approvals for flats or units in one or two storey buildings are a small portion of the total market, and as such are more prone to volatility. Approvals in the March Quarter 2023 (43) were 37.7 per cent lower than the previous quarter (69) to be down by 68.8 per cent from the March Quarter 2022 (138).

ApprovalsforFlatsorUnitsof1or2Storeys

Approvals for flats and units in three storey buildings are also a small portion of the market and prone to volatility. Approvals in the March Quarter 2023 (388) increased by 34.3 per cent from the previous quarter (289) and are down by 3.7 per cent from the March Quarter 2022 (403).

ApprovalsforDwellingsof3Storeys

Source: ABS 8731

Approvals for apartments in buildings of four to eight storeys in the March Quarter 2023 (2,391) fell by 28.6 per cent from the previous quarter (3,347) and are down by 35.3 per cent compared to the March Quarter 2022 (3,698).

ApprovalsforDwellingsof4+Storeys

Approvals for apartments in buildings of nine or more storeys in the March Quarter 2023 (2,799) fell by 65.4 per cent from the previous quarter (8,079) and are down by 40.4 per cent on the March Quarter 2022 (4,696).

ApprovalsforDwellingsof4to8Storeys

ApprovalsforDwellingsof9+Storeys

HousingIndustryDataandChartPack

DwellingStartsForecast-Australia

New Housing Forecast

Housing Renovations Forecast

Total Investment in Housing Forecast

Non-Dwelling Construction

Non-residentialBuildingApproved:byType,AUS

$ million, chain volume measures, base 2019/20

EngineeringConstructionWorkCommenced,Aus

Housing Finance Loans for the Construction of a Dwelling

These loans represent commitments made to individuals to finance, by way of progress payments, the construction of owner occupied dwellings. These loans do not include commitments made to individuals to build an investment property.

LoansfortheConstructionofaDwelling

Loans for the Purchase of a New Dwelling

A new dwelling is one that has been completed within 12 months of the lodgement of a loan application and the borrower will be the first occupant. These loans do not include commitments made to individuals to purchase a new investment property.

LoansforthePurchaseofaNewDwelling

Loans for the Purchase of an Established Dwelling

An established dwelling is one which has been completed for 12 months or more prior to the lodgement of a loan application, or which has been previously occupied. These figures exclude refinancing of established dwellings.

LoansforthePurchaseofanEstablishedDwellingexcludingrefinancing

Total Number of Home Loans

The total number of home loans includes loans for the construction of a dwelling and the purchase of new and established dwellings.

It does not include refinancing of established dwellings or loans for alterations and additions.

TotalNumberofHomeLoansexcludingrefinancing

Alterations and Additions

The alterations and additions market is the most difficult sector to accurately measure and report upon. This is due to the significant amount of unreported owner/builder activity and the reporting arrangements of the Australian Bureau of Statistics. Under current requirements, only those jobs exceeding $10,000 in value and requiring a permit are reported. Other independent organisations have estimated that there are around 5 million jobs completed each year at an average value of $2,500.

ValueofLoansforAlterationsandAdditionstoDwellings-($M)

Building Approvals

Residential building approvals data allows the direct estimation of dwelling commencements. Dwelling commencements lag building approvals by around six to twelve weeks. Not all approvals proceed to the commencement phase of the construction cycle – as a ‘rule of thumb’ around 96 per cent of approvals convert to dwelling commencements.

MonthlyDwellingApprovals-Australia

Dwelling Commencements

DwellingCommencements-Australia

Dwelling Commencements - Australia

Consumer Price Index and Building Material Prices

The Consumer Price Index (CPI) measures quarterly changes in the price of a ‘basket’ of goods and services, which account for a high proportion of expenditure by the population. It is a measure of the cost of living. The Building Materials Price Index measures the changes in the prices of selected materials used in the construction of houses in the Statistical Division for each State. The two series are directly comparable and the graphs below show the movements in the series over the past five years.

PriceIndexofMaterialsUsedInHouseBuilding-Australia

PriceIndexofMaterialsUsedinHouseBuilding

PriceIndexofMaterialsUsedinHouseBuilding

ConsumerPriceIndexvsPriceIndexofHouseBuildingMaterials

Labour Price Index

The Labour Price Index measures quarterly changes in wage and salary costs for employee jobs. These indexes were compiled for the first time for the December quarter 1997 (with a base of September quarter 1997 = 100.0). The methodology is similar to that used for other price indexes such as the Consumer Price Index.

Labour Price Index - Australia

LabourPriceIndex-Australia,MarQtr2023

Population and Migration

Population growth is one of the main drivers of new housing activity. Below is a graph and table showing the estimated residential population as at the latest quarter and shows the growth in population.

PopulationGrowth-Australia

AnnualPopulationGrowth-Australia

Construction Labour Force

The graph and table below show movements in the number of people employed in the construction industry over the past quarter (seasonally adjusted).

EmployedPersonsintheConstructionIndustry-Australia('000)

EmployedPersonsinthe

Skilled Vacancies

The Skilled Vacancies Index is based on a count of skilled vacancies in the major metropolitan newspaper of each State and the Territories, usually on the first Saturday of each month. The data published are trend data with November 1997=100.

SkilledTradeVacancies-Australia

Dwelling Price

The mean price of residential dwellings represents the average dwelling price in the reference period regardless of dwelling type. The mean is derived by taking the total value of residential dwellings and dividing by the estimated number of dwellings in the stock. Additionally, the mean prices are calculated across the whole of state and for all dwelling types, whereas the medians are calculated for individual dwelling types and for the capital city and rest of state separately.

ABS Dwelling Price Indices- Australia

ResidentialPropertyPrice-Australia,December2022quarter

Price Ranges

Dwellings Approved by Building Value Price Range - AUST Mar Qtr 2023

Source: ABS unpublished building approvals data

Average Size and Value

Average Size & Value of Approved Detached Dwellings

March Quarter 2023

AverageValueperSquareMetre-Australia