Queensland Residential Construction “Red Hot”
In March, when the realities of the COVID-19 pandemic were setting in, Queensland’s residential dwelling approvals dipped to 1668 – down from 1765 in February. It was a sign of things to come. By May, approvals were down to 1559. June saw a huge turnaround, bringing the figure up 1709. The uptick continued into August, where the latest data reports 1769 approvals.1
This may get you thinking; what kicked off the construction recovery, and how sustainable is this growth?
In late March, the Federal Government announced a measure allowing Australians to access their superannuation funds. Those who had suffered a loss of employment or had their working hours significantly reduced were eligible to withdraw $10,000 from their superannuation in the 2019-2020 financial year, and a further $10,000 in the 2020-2021 financial year. Despite the financial suffering, it’s believed the initiative boosted home renovations and therefore aided the residential construction industry.
“The residential sector is red hot, and that can be attributed in part to the government’s Super Early Release Scheme,” says Dyan Johnson, Manager of Policy and Economics at Master Builders Queensland. Johnson says with Queenslanders withdrawing an estimated $5.88 billion, a majority of this money has been injected directly into the economy. “Putting two and two together, we would assume a lot of people were withdrawing their super money and then reinvesting it in their homes,” she added.
The Power of grants
At the beginning of June – the month which really saw dwelling approvals rebound – the Federal Government’s HomeBuilder scheme came into effect. “HomeBuilder has really driven a lot of the demand for new residential dwellings, and that’s reflected in the building approval numbers,” says Johnson. “A lot of larger project home builders are actually closing their books now because they’re concerned they can’t get to site within the timeframe to access the HomeBuilder grant.”
Notably, the various grants have seen construction boom right across Queensland, not isolated to specific regions. “In my time here it’s always been very hot and cold across the regions, and this is quite unusual in that it’s being felt everywhere,” explained Johnson. “Areas like Townsville were on an upward trajectory before COVID, so that’s just continued. But places like Cairns that you’d think would be hit really hard are just surging ahead thanks to HomeBuilder.”
The only real downside of HomeBuilder, says Johnson, is that there’s only so much viable land to build upon. “There are some areas, like Brisbane and Gold Coast, that will struggle to have the land supply,” she said. “What’s actually ready to be built on right now is all but snapped up, so we might see more of a shift to renovations.”
2021 and Beyond
With HomeBuilder effectively coming to an end at the end of 2020, and no more options for Australians to access their super, there are some concerns surrounding next year. The government’s recent budget announcement included an additional 10,000 places up for grabs for the First Home Loan Deposit Scheme (FHLDS), which is positive, but hardly all-encompassing.
Other budget inclusions that could aid the housing sector include a boost to low-cost financing for affordable housing through the National Housing Finance and Investment Corporation (NHFIC) and additional funding for the Indigenous Home Ownership Program. But there are other, less-direct measures that could positively affect housing. These include additional tourism funding, infrastructure spending, and the JobMaker and JobTrainer initiatives. JobMaker and JobTrainer financially encourage employers to take on young people – the demographic most likely to be applying for positions in the FHLDS.
Without further monetary stimulus, however, or a growing population, Johnson is concerned the current surge in construction will be short-lived. “At the moment, we’re surviving on stimulus – kind of a sugar hit, if you like,” she said. “If we’re going to get a good, long-term, stable construction industry, that only comes through a steady growth in population. We’re doing fine just now, but into the long term we need to get those jobs back and get people coming into the State.”
While reopening borders is an enticing prospect, State and Federal Governments will be twice as shy after witnessing Victoria’s second wave of COVID-19 cases. If opening our doors to interstate and international migration doesn’t become a genuine option in the early months of 2021, continuing the “sugar hit” may prove to be the only way to keep construction flowing and property transacting.