The Housing Industry Association has warned Australia’s current construction boom could hit a wall by mid-2022.
In its latest quarterly outlook, the HIA blamed two years of limited population growth and pointed out that homes were taking twice as long to build during the pandemic as a result of labour and material shortages.
The HIA said the commencement of new construction is forecast to fall to 125,030 over the next financial year.
The HIA projects home building will decline below decade-long averages, dropping to 97,850 in 2023 and a low of 93,770 the following year.
Despite the warning, the latest International Monetary Fund (IMF) report is a bit more upbeat.
While the IMF has cut its forecast for Australia’s economic growth this year, it has forecast a solid rebound next year as restrictions ease and the economy reopens.
In its latest World Economic Outlook report released this month the global economy will expand by 5.9 per cent this year, down slightly from its six per cent forecast in April.
The IMF attributed the downgrade to supply chain disruptions caused by COVID-19.
In Australia, where extended lockdowns and consumer and employer uncertainty have hit jobs and spending, the IMF expects growth to reach 3.5 per cent this year, down from its earlier prediction of 5.3 per cent.
Despite this the IMF upgraded Australia’s forecast for next year from three per cent to 4.1 per cent.
The IMF’s executive board warned that governments and central banks have to walk a fine line between engineering growth and guarding against increased financial system risks such as soaring house prices which are up more than 20 per cent in Australia.
“In a worst-case scenario, the house price decline over the next three years is estimated to be about 14 per cent in advanced economies and 22 per cent in emerging markets – somewhat higher than their pre-COVID-19 levels,” the report said.
With prices in Sydney and Canberra, for example, rising at their fastest pace in more than three decades, Australia is one of a group of countries, including the US, UK, New Zealand and Canada, where fiscal and monetary pandemic relief has further pumped up the housing market.