Biggest collapse in home builds in four decades

New home builds in Western Australia have plunged 32.2 per cent in the latest quarterly data, the most significant drop in almost four decades, as rising costs slow the construction boom.

According to the latest building activity data from the Australian Bureau of Statistics, residential builds fell nationwide for the third consecutive quarter in the three months to March 2022.

Nationally, the number of new dwelling starts dropped by 6.5 per cent in the March quarter, with an 11.1 per cent decline in house starts and a 2 per cent increase in apartment builds.

Western Australia recorded the most significant quarterly decline in the country at 32.2 per cent; the state’s largest drop in more than 37 years.

WA was followed by South Australia, which recorded a drop of 20.4 per cent, and Queensland, where new builds were down 11.4 per cent.

State and federal government stimulus and record-low interest rates have sent activity in the residential home building sector soaring over the past 18 months.

But construction costs have spiked across the country, with persistent supply chain issues, lengthy border closures and a tightened labour pool having heightened demand for materials and driven increases in wages.

While there was still a lengthy $121.6 billion pipeline of work to be completed, Commsec senior economist Ryan Felsman said he believed higher costs, worker shortages, affordability constraints and lower migration would slow momentum in the construction cycle.

Commonwealth Bank Group economists predict private home and apartment starts to continue falling over the course of the next 18 months.

“In our view, the lift in overseas migration, deteriorating detached housing affordability and an acute rental shortage is expected to drive demand for higher-density living, including apartments,” Mr Felsman said.

“Land constraints are likely to weigh on detached house building activity in 2023.”

The data comes just days after global professional services firm Turner & Townsend found Perth’s construction costs were tipped to increase more than in any other capital city in Australia.