New homes under construction fell by 28 per cent across Queensland in December 2022 compared to the same quarter the previous year, as interest rate rises, cost of building supplies and labour shortages continue to affect the housing industry.
According to Australian Bureau of Statistics building activity data, in 2022 there were 35,000 homes that began construction in Queensland, which is down 22.1 per cent from 2021.
Nationally, the number fell by 20.4 per cent.
In the December quarter in 2022, the figure in Queensland was down 17.6 per cent from the previous quarter, which was an outlier across the eastern seaboard.
What's caused the construction downturn?
It's well documented that the industry has been battling rising material costs and a shortage of labour, said Paul Bidwell, chief executive of Master Builders in Queensland.
This, coupled with soaring interest rates, has affected consumer confidence.
"What we're seeing right now is that investors have walked away because of high interest rates, and people can't afford to get loans," he said.
He said the post-COVID migration to Queensland not only caused a rise in property value, but also created enormous demand which meant building houses took a lot longer and cost a lot more.
All these factors are contributing to the current housing shortage.
"We've still got a crisis right across Queensland because you cannot rent a house for love nor money," Mr Bidwell said.
Foreign investors
Executive director for the Housing Industry Association (HIA), Mike Roberts, said the figures showed how integral foreign investors were to Queensland's housing availability.
Mr Roberts said since additional taxes were imposed on foreign investors in 2016, there had been a 47 per cent drop in the number of apartments that began construction in Queensland.
"Housing reacts like any other commodity, when you impose or increase a tax, people stop spending," he said.
"Clearly the foreign investors left the market, took their money and spent it somewhere else … and that's obviously having a significant impact given the significant drop we've seen."
What are some possible solutions?
When it comes to housing supply, social welfare advocates are calling for more to be done to identify vacant property and land in Queensland.
Building affordable and social housing should be a priority, too, they said.
The government said it had invested heavily in prefabricated homes to ease the housing shortage.
The prefab homes cost about the same as a standard unit and some can be built in just four weeks, according to Housing Minister Leanne Enoch.
A spokesperson for Queensland Treasurer Cameron Dick said the government was working to increase housing supply.
"The Palaszczuk government is only offering tax concessions that will demonstrably increase the supply of new housing, not those which may actually reduce the availability of existing stock," he said.
Mr Roberts said solving the housing shortage would require long-term solutions.
Ongoing supply of land that can be developed – both greenfield (undeveloped areas) and infill (a development site that exists within a mostly built-out market) locations – is critical, he said, as well as reducing barriers to allow construction to commence in a timely way.
"We need the local governments to get in there and facilitate and help assist the delivery of the housing,' Mr Roberts said.
"So that means streamlining approval processes, streamlining their planning schemes, and actually encouraging more housing rather than putting in place barriers."
He said the increased cost of building materials over the past two years had started to settle down.
"There is an ongoing issue with labour supply, but we're hoping that as activity returns to more normal levels, the supply of labour will increase or improve anyway," he said.
Contributing to the housing shortage
A decrease in dwellings is contributing to our current housing shortage, according to both Master Builders and the HIA.
Mr Roberts said that Queensland needed a range of dwellings to be built, not just homes and apartments, to address the issue.
Townhouses, duplexes, triplexes, terrace lot homes and granny flats are among the types he is calling for.
"We need housing to be provided across the full spectrum so that it gives people a choice of the type of dwelling that they can afford, or want to live in," Mr Roberts said.
"We need it in lots of different locations so people can make a decision about whether they want to live close to work, or they want to live close to school."
What will the next few years look like?
Due to an uptick in the number of contracts that were signed last year and early this year, the housing industry is set to be quite busy for the next 12 months as those contracts are completed.
But there will be a steady decline in construction after the final quarter of this year, Mr Roberts said.
"The data that we're looking at, from January and February this year, shows quite a significant drop in the number of contracts that have been signed, and they are the houses we will be building in the fourth quarter of this year and the first half of next year," he said.
Mr Bidwell said interest rates would determine whether that upward pattern continued.
"We've had 10 increases and there's a pause at the moment, with any luck that will continue," he said.
Plus, the sales of new homes, and new loans for bought and built homes, have dropped.
Mr Bidwell said Queensland wasn't projected to get up to 40,000 new dwellings until 2026/2027.
"That isn't even enough to house the projected population growth," he said.
Queensland has seen a recent uptick in construction businesses insolvencies.
Mr Bidwell said he knew of 11 insolvencies since last year due to high interest rates, high construction costs and fixed-price contracts.
"That is tragic for those subcontractors that work for the builders, and for those home owners who were waiting for their homes to be completed," he said.
"I'm not trying to downplay that number, but it's useful to keep it in perspective."
