“That new housing commencements are down is a particularly worrying sign and shows how fragile our housing pipeline is,” he said.
These numbers are well below what’s required to meet the government’s ambitious targets for the next five years, said economist Saul Eslake. “Unless something seemingly miraculous happens, those targets won’t be met.”
“That’s not necessarily the federal government’s fault, because most of the impediments to housing supply are at the state and local government level,” he said.
A squeeze on skilled construction workers – many of whom are choosing to work on the multiple state government infrastructure projects that are under way – is also exacerbating the problem, Eslake said.
RLB’s Oceania director of research and development, Domenic Schiafone, said the volume of commencements, decreasing across all sectors, was now below decade averages.
Loading
“We’ve still got plenty of work on now, but those commencements are going to be the work in two years’ time,” he said.
Sydney and NSW are the main activity drivers on the RLB Index, accounting for nearly half the country’s cranes.
“Traditionally, Sydney’s always had more [cranes] than Melbourne,” Schiafone said, adding that Sydney had many more mid-tier (five- to six-level) apartment blocks being built at any one time than Melbourne, where the norm is high-rise.
Melbourne’s residential market has slowed “quite dramatically”, making the gap between the two cities’ crane activity quite significant. Sydney hosts 387 cranes, while Melbourne has 191 fewer.
Currently, 57 per cent of all cranes – a total of 493 – are working on apartments around the country, down from 535 at last count. About 134 were added to residential projects over the six months to September, but a larger number (176) were removed from sites.
Melbourne’s $36 billion North East Link project has the largest crane deployment of any single project in the country.Credit: Eamon Gallagher
“Development costs and feasibility are not stacking up at the moment. It’s difficult for developers to get projects out the ground,” Schiafone said.
The number of non-residential cranes hit a new peak of 370 over six months to September, rising 10 per cent on the previous half-year in line with ABS data, which showed construction was up 2.2 per cent (or $3.3 billion) in the first six months of this year.
Strong migration into Australia is also contributing to the country’s housing woes. Net overseas migration – the growth or decline in population – over the year to June 2023 was 528,000 people, the highest since records began.
That figure is expected to drop significantly this financial year, but is still likely to grow at around 2 per cent in coming years, according to the ABS and the Centre for Population.
“I wouldn’t dispute for a moment that the surge in immigration has exacerbated our housing problems, but it isn’t the fundamental cause of it,” Eslake said.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
