Victorian home building continues to rise

Victorian home building continues to rise with record numbers of homes under construction

The latest ABS quarterly housing construction figures for Victoria underscore the challenges faced by Victorian home builders in managing record home construction, rising materials costs and labour shortages.

Commencements of detached homes rose by 5.3 per cent in the first quarter of 2022 in Victoria, from 10,005 to 10,539, with a record of almost 30,000 homes under construction. Total commencements for the last 12 months reached 46,651, also nearly a record high level.

“Commencements of detached homes rose by 5.3 per cent in the first quarter of 2022 in Victoria, from 10,005 to 10,539, with a record of almost 30,000 homes under construction.”

While there’s been a slowing in the quarterly growth figures, the volume of new homes under construction in Victoria is still 54% higher than pre-pandemic.

It is also likely that home-building activity in the first quarter of 2022 was held back by staff shortages associated with the Omicron outbreak and the higher than usual uptake of holiday leave.

Victoria also managed to complete 10,162 detached homes in the quarter, nearing record highs and just 1.1 per cent down on the previous quarter. This represents the gradual but continued progress being made in the HomeBuilder pipeline and this should help gradually reduce the pressure on the supply of materials and labour.

“Victoria also managed to complete 10,162 detached homes in the quarter, nearing record highs and just 1.1 per cent down on the previous quarter.”

The volume of detached home work under construction is more than 50 per cent above pre-pandemic levels.

This has been driven by the combination of the HomeBuilder grant, reduced personal expenditure during COVID and record low-interest rates.

All the extra time Victorians were spending at home either working or locked down, resulted in a pandemic trend towards creating greater space and amenity. This has kept demand for new housing and renovations elevated post HomeBuilder. Other indicators, such as building approvals, finance approvals and new home sales, continue to show a strong volume of work entering the pipeline.

In addition, the multi-unit market is continuing to strengthen. Multi-unit commencements increased by 6.7 per cent in the March 2022 quarter to be 24.0 per cent up in the last 12 months compared to the previous year. This improvement has been seen in both high-rise and medium-density units.

“Multi-unit commencements increased by 6.7 per cent in the March 2022 quarter to be 24.0 per cent up in the last 12 months compared to the previous year.”

With interest rates and the cost of building increasing rapidly, affordability constraints will increasingly push home buyers back towards more affordable, higher-density living. The return of the overseas migrants, students and tourists that Victoria depends upon more than any other state or territory, will help further strengthen the multi-unit market.

The combination of all these demand and supply factors will keep Victorian builders busy in 2023.