Some of Australia’s biggest builders are worried the latest federal budget will not lead to any new homes being built for years — and could cut numbers.
Australia’s largest builders have warned the federal government’s housing-focused budget won’t add any extra homes to the nation’s home supply this year or next.
While a $2bn shot in the arm for infrastructure works around the nation could underpin a 5-10 per cent uptick in new home builds, starting up to four years from now, three of the nation’s biggest builders warn it is contingent on state and local governments doing a better job.
The two layers of politics were the ones who arguably helped shape the nation’s current housing crisis, with decades of shortfalls in new housing supply in most states.
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The big announcements for housing in the federal budget included continued support for first-home buyers, $2bn in additional infrastructure funding to support new housing and significant reforms to negative gearing and capital gains tax exemptions.
The two tax tweaks would appear to favour investors purchasing new builds as they will be the only arena of the housing market where investors can still claim the tax rebates.
However industry groups have warned that the overarching risk of reductions in the established housing market, which is being compounded by rising interest rates, could have a pronounced effect on how many new homes are built.
Australia’s biggest builder Metricon is among those tipping a hit to housing.
Jim Chalmers’ budget announcements have some wins for builders, but changes to negative gearing and CGT have them worried. Picture: The Daily Telegraph / Martin Ollman.
Chief executive Brad Duggan said changes to capital gains tax and negative gearing would “undoubtedly put downward pressure on established real estate prices”.
“For this reason, we are not expecting the budget announcements to have a positive immediate impact on new home commencements,” he said.
“In fact, there is potential for a negative impact on housing supply in the short term if these changes make new homes less competitive against established stock.
“But the bigger opportunity is not in the next 12 months. The real lift is more likely to come over the next two to four years, once infrastructure funding starts translating into more titled, serviced and build-ready land.”
Mr Duggan noted that the requirement behind the scenes for this was that state and local governments would have to move faster on approvals, land releases and infrastructure delivery for their to be an boost — which could be 5-10 per cent over time.
Metricon chief executive Brad Duggan fears the budget could pave the way for fewer new homes being built around Australia. Picture: Richard Walker.
“The hard truth is that a budget announcement does not pour slabs, connect services or approve estates,” he said.
“We are seeing an ever-growing bias towards high-density apartment living from state and federal governments.
“This is often the most expensive form of housing to deliver in the country.
“The true answer to increased affordability and housing supply is that we need to rebalance the focus and recommit to a broader mix of housing, including greenfield developments, so Australians have more choice and can live where they want to live.”
Mr Duggan noted while they were not expecting a hit to their 4500 anticipated home builds this year, the budget had set the nation up for home building pain ahead.
“One thing the budget does not fully contemplate is that demand for new home construction is critically linked to the price of established real estate,” Mr Duggan said.
“Growth in new builds will be difficult if established real estate is at parity with, or cheaper than, the cost of a new home.”
New home building is driven by a complex array of factors, but one of the biggest is what is happening to the existing housing market.
The nation’s fourth biggest builder, NEX Building Group is also not expecting substantial increases in home construction in the near future.
Head of corporate affairs Brett Lavaring said by the time the National Housing Accord was drawing to a close, announcements made this year could be leading to more builds — but not for the apartment sector.
“We won’t see any change straight away, there are market conditions that will curtail the enthusiasm of buyers,” Mr Lavaring said.
“We have our own goal to build more homes this year than last and we are working towards that. I don’t think the budget will influence that.
“But it does more for the detached housing market than other parts of the new home market, like apartments.”
He added that responding to infrastructure needs was a good step, as it acknowledged Australia had a “land crisis” more so than a housing crisis.
A rise in skilled migration could also be beneficial, though he noted they were expecting rising demand for tradespeople to work on major projects to ramp up across the country, especially the Brisbane Olympics.
Infrastructure funding has been lauded, but builders fear it will take years to have an impact — and relies on local and state government improving their output.
At Australia’s fifth biggest building firm, Mirrastone (formerly AHB Group), saw positives in the government’s increased focus on infrastructure for its acknowledgment that new homes aren’t delivered in isolation.
“But at this stage, it is too early to quantify exactly how many additional homes the budget may unlock, or when that uplift would materially flow through to construction activity,” said Mirrastone chief executive Nathan Jenkinson.
“The impact will depend heavily on how quickly infrastructure funding translates into shovel-ready projects, planning approvals and buyer confidence.”
He added that while changes to taxation could incentivise new build investment over established homes, broader affordability issues were still a significant factor.
“Ultimately, tax measures alone will not solve affordability if projects continue to face infrastructure bottlenecks, planning delays and rising delivery costs,” Mr Jenkinson said.
“We need co-ordinated policies that stimulate investment and accelerate the infrastructure needed to support growth corridors and regional communities.”
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