Australian near-term building outlook remains challenging

Negative momentum for total building in FY2023 (-8%) is expected to continue in FY2024, with activity sliding a further 11% to $108.4 billion (constant FY2021 prices). The uplift in build costs and a large backlog of work that is proving difficult to draw down are amplifying the demand drag of higher borrowing costs. Delays and builder administrations are further supressing home buyer confidence.

What you will learn:

• The residential commencement downturn will roll on in FY2024, with dwelling starts sliding to an expected trough of 149,800 (-13%). Forward activity leads have tracked largely as anticipated in recent months. Approvals for Q3 were close to guidance, while both greenfield land and off-the-plan indicators remain weak, but greenshoots are showing in some regions.
  
• Underlying housing demand is receiving a boost from record migration, placing considerable pressure on the existing dwelling stock. For new dwellings however, the relay of this will take a few years to play out. Policy announcements continue to drip through in connection to the National Housing Accord, although they won’t provide a short-term fix.
  
• Non-residential building commencements are geared to recede a cumulative 9% to $45.84 billion over the two years to FY2025. A series of sectoral and economic headwinds, compounded by increased development costs, will see private investment lead this decline. Some support will come from