Even at the end of December, work in the housing pipeline had lifted massively – and has only increased since then. The pipeline of housing construction work is full to bursting right now, with expectations that will continue for at least two more years, on the current approvals alone.
In the December quarter of 2020, new houses commenced had rocketed 27% higher than the prior quarter, to 34,313 commencements – not far off the all-time peak. If this was annualised – just as an example because the market doesn’t work quite like that – new house commencements would be approaching 150,000 units. That is large, by any measure in the Australian economy.
Completions over the same period lifted just 4.8%, meaning that houses under construction lifted a large 10.5% to 65,105. It is anticipated that the March quarter (data will not be available for another two months) saw only marginally less commencement activity. If that is the case, given the apparently drawn-out nature of the housing pipeline, houses under construction are probably approach record levels.
Perhaps even more telling, if we look back a decade, is the value of new housing work in the pipeline. The year-end value may have been higher in the December quarter of 2018, but as we look at the second chart, it is hard to escape the pace of the current turn around, or its consistent growth through the June, September and December quarters.
At AUD 56.915 billion year-ended December, the annualised value is rocketing up towards record levels. It could be that the early demand for the HomeMaker program will not be reflected in the March quarter of 2021, but if it is, and we experience another quarter of growth at this level – up 13.4% compared to the September quarter! – the total value of work in the pipeline will be closing in on record levels.
On this front, at a policy level, it was compelling for the Federal Government to agree to an extension in the ‘must start’ date for the housing supported by the HomeMaker program. If nothing else, that development locks in a pipeline of work until at least 30th April 2023.
The good news for the housing sector and its participants is: that is long enough to support comprehensive business planning and development for a period when the housing sector is not being floated continually higher by massive government stimulus.
