Housing boom bust

ONE profession that accelerated during the doom and gloom stages of the pandemic was the building industry, with the HomeBuilder and renovation grants in the 2020–21 financial year creating massive demand. But the purple patch is tapering off with houses approved for construction down 21.8 per cent nationally last calendar year. The Housing Industry Association (HIA) reported the decline can also be attributed to the rising cost of construction, a change in consumer demand for more living space, and rising interest rates, which it warns the Reserve Bank, will impact employment to a not yet realised extent. In Wangaratta, building approvals jumped from 147 in 2019–20 to 205 in the 2020–21 year, but last financial year they returned to 142 approvals as the HomeBuilders grant expired. Under the scheme, eligible homeowners could apply for grants of $25k for renovations and new constructions valued between $150k and $750k. Stephen Swart, Wangaratta council director sustainability and culture, said local building approvals have fluctuated over the past three financial years. "The number of houses approved in the Rural City of Wangaratta in the 2021–22 financial year was more reflective of the average levels of approvals in the preceding decade, with building approvals issued for 142 houses." The decline continues nation–wide with the Australian Bureau of Statistics releasing monthly building approvals data recently for December. "This data included a 2.4 per cent decline in house approvals in December 2022, to 8989, the second weakest monthly performance in the last two–and–a–half years," HIA chief economist Tim Reardon said. "Much of the decline between 2021 and 2022 was the expected consequence of the end of the HomeBuilder grant in 2021. "The market was also cooling as the cost of construction rose, and the change in consumer preferences due to the pandemic desire for space, eroded." Rising interest rates have also had an impact on the building industry but it's uncertain as to what extent. "The adverse impact of the fastest increase in the cash rate in a generation will not be fully observed in building approvals data until later this year and will not hit building activity on the ground until late 2023," Mr Reardon said. "The significant pipeline of work that Australian builders are still completing, combined with ongoing materials and labour constraints, is creating significant lags between the RBA's hiking cycle and on–the–ground activity. "This lag from the first rate rise until it impacts employment is dangerously long in this cycle. "The RBA needs to be very cautious in raising rates as the impact of their actions won't be observed in official data for nearly 18 months, in this cycle."

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