A message from Simon Basheer, UDIA National President.

UDIA National has unveiled a new industry survey designed to support an extension and re-design of HomeBuilder given the extended economic downturn facing Australia as a result of COVID-19.

In September, UDIA lodged a submission with the Commonwealth Government – entitled HomeBuilder Mark 2 – making the case for its extension to tap the capacity for residual domestic demand to support economic recovery until net overseas migration and population growth return.

We briefed the office of the Assistant Treasurer and Minister for Housing, Michael Sukkar, and committed to seeking more ‘real time’ on how HomeBuilder was influencing housing construction pipelines, as well as the trajectory into 2021 if it ended.

The industry survey commissioned via our state divisions – representing a robust mix of developers and builders across the nation – clearly illustrates HomeBuilder has worked to boost new home construction, jobs and activity across supply chains.

However, the results also show there is a real risk that approvals, new home starts and the associated economic activity will slow in 2021 absent an extension and redesign of HomeBuilder.

A full copy of our report to the Minister is available here but the headline takeaways include:

• 55.3 per cent of respondents saw their average monthly sales decline in the period from March-May 2020 (at the time of the initial COVID19 lockdowns), compared with the prior six months. Another 19.5 per cent stagnated

• 91.4 per cent of the industry saw an increase in average monthly sales from June to September 2020 once HomeBuilder was announced – including over half of all respondents enjoying a jump of more than 50 per cent

• The industry on balance expects to sustain sales for the balance of calendar year of 2020 due to the upside of the Government’s stimulus measures

• Absent a continuation of HomeBuilder, almost 66 per cent of the industry anticipate a significant drop in sales volumes in 2021.

Australia faces a sustained downturn in immigration and population growth, which usually fuel much of the nation’s economic prosperity and demand for new housing construction. That is why in our September submission, UDIA National partnered with Urbis to quantify the effect. Our research found:

• Net Overseas Migration (NOM) accounts for 56 percent of Australia’s dwelling demand, with natural domestic population increases accounting for 44 per cent
• An average per annum reduction of over 50,000 homes per year will occur in the number of new homes being constructed over the next five years
• $17.9 billion less direct gross value added (GVA) being contributed to the Australian economy between 2020 and 2025 from the loss in construction.

The research did however also find that the residual domestic demand is substantial and could play a crucial role in lifting Australia’s economy especially over the short to medium term. UDIA is now recommending a second tranche of funding to support HomeBuilder as well as design solutions to the Scheme to maximise the benefit.

These recommendations include:

• Allocating an additional $1.25bn funding stream to support the construction of 50,000 new homes with an anticipated economic stimulus of at least $3 billion into the Australian economy

• Adjust the timelines applying to the scheme to provide for greater participation by apartment, townhouse and land development projects that more appropriately mirrors housing demand within Australia by:
  • Extending the timeframes for building contract signing (or split or two-part contracts) or sales contracts (for 1-part contracts) to be entered into from December 31, 2020, by six months to June 30, 2021;
  • Extending the construction timeframes, depending on the nature of the project, with:
    • Detached housing to have a new commencement timeframe of December 31, 2021, and
    • Semi-detached and attached housing (ie: townhouse and apartments projects) to have a new commencement timeframe of December 31, 2022
  • Redefining the definition of “commencement” to allow for flexibility which accounts for differences in staging, timing and triggers for detached, semi-detached and attached housing products;

• Amending the definition of house and land price thresholds to remove land costs and in doing so, provide parity between new housing construction and renovation projects

• Increase the income thresholds of the scheme to capture a wider range of buyers, given the current limits reflect an approach tailored largely to first home buyers

• Providing for the construction of manufactured homes to be used in land lease community to be captured by the scheme, recognising their current exclusion due to requirements around certificate of title

• Extend the current grant’s availability in Victoria from December 31 for a further six months and allow for a subsequent extension of the start of the construction phase for a further six months in recognition of the effects of the severe, extended lockdown currently in place

• To ensure that there is no dislocation in the market, any new arrangements to the scheme’s application should be applied immediately from the date of announcement (rather than a latter date, which would risk seeing homebuyers freeze or delays decisions).

We look forward to keep you informed on our advocacy.

Simon Basheer

UDIA National President