IBISWorld forecasts the number of dwelling commencements to climb by 7.2% in 2024-25, to 170,168. This growth is expected to be driven mainly by recovering multi-unit commencements as rebounding migrants are set to support demand for apartments and multi-unit residences. While a large construction backlog will support dwelling commencements, labour and material shortfalls will keep construction costs elevated, placing downward pressures on dwelling commencements. Higher interest rates are encouraging consumers to save more money, reducing housing investment and demand for new detached homes. Elevated land costs and taxes are also constraining recovery in detached house commencements.
Australia’s growing population has supported many dwelling commencements over the past decade. Growth in residential housing prices in 2015-16 contributed to high levels of dwelling approvals and commencements. Developers sought greater returns on their developments, which drove more high-density and affordable dwellings like apartments. Nonetheless, the closure of Australia’s international border from March 2020 to February 2022 because of the pandemic caused a collapse in net migration. Likewise, falling business confidence and limits on foreign investment led to a sharp fall in demand for new dwellings. Government stimulus has partially supported demand, primarily through the Federal Government’s HomeBuilder scheme, which was implemented to support the residential construction sector. The number of building approvals surged for detached homes after the HomeBuilder scheme's introduction and the effects filtered through to dwelling commencements. Besides, low interest rates and further government stimulus, like the JobKeeper payment package, uplifted real household discretionary income, which contributed to increased dwelling commencements in 2020-21.