The end of the HomeBuilder government incentive scheme has seen a sharp drop in new dwelling approvals.
Figures for July show that new home approvals fell by 8.6 per cent which was more than expected.
The homebuilding industry will still have plenty of activity to deal with as it works through the surge that came from the announcement of HomeBuilder, with private house approvals 28 per cent higher than the same time last year and 36 per cent higher than the year prior to that.
Things next year don’t look quite so certain however.
AMP Capital chief economist Shane Oliver spoke to the Australian Financial review.
“Private house approvals remain at historical high levels and the lagged impact of the surge in approvals up until recently points to a significant further rise in dwelling construction activity over the remainder of this year,” he said.
“However, next year risks seeing a slump in home building reflecting the pull forward of activity due to HomeBuilder, reduced demographic demand after two years of zero immigration and the risk that the latest lockdowns impact homebuyer sentiment – not that there is much sign of this yet.”
To give some scope of how big this approaching slump could be, Yarra Capital Management’s Tim Toohey told AFR that by the end of 2023 Australia will have an oversupply of 150,000 dwellings even if migration returns and new dwelling approvals fall by 30 per cent.
Despite this, Mr Toohey says he doesn’t expect this to result in a sharp decline in house prices, which he tips to stay put thanks to low interest rates.
“Expectations of ongoing house price gains over the next two years may be disappointed and more importantly the boom in new single house construction will be followed by a deep downturn.”