Australian Construction Outlook – Residential Building

The most consequential development in the residential building sector over the past year has been the COVID-19 pandemic and the responses to it by governments, households and businesses. Residential building was in a downturn prior to the upheaval caused by COVID-19, but we now expect investment to fall further and recover slower, impacted by lower rates of population growth (as a result of near zero overseas migration) and elevated levels of unemployment. Government incentives such as HomeBuilder will bring forward some demand in the short term, but the conditions in the policy itself will limit its reach, and we don’t expect it to go far in offsetting the other forces at play.

In the overall residential building sector, we expect the number of dwelling starts to drop to around 141,000 in financial year 2020/21, down from an estimated 167,000 in 2019/20, and from a peak level of more than 230,000 in 2018. We anticipate most of this decline to occur in the attached dwelling segment, falling from 67,800 starts in 2019/20 to 52,600 in 2020/21, while detached houses fall from 99,400 to 88,400. Further ahead, we expect starts to remain flat in 2021/22, before lifting from the 2022/23 financial year.