Agents, builders at odds on housing stimulus

Australia’s peak real estate industry group has warned the federal government that providing stimulus for new homes and not established dwellings could have detrimental effects on the property sector and the wider economy.

Earlier this week, Prime Minister Scott Morrison and Treasurer Josh Frydenberg announced they were working on a plan to support the residential building sector, following sustained lobbying by industry groups such as Master Builders Australia and the Housing Industry Association. 

While details have not yet been released, the plan is expected to include some form of grant designed to kickstart the stalling industry.

HIA data released this week showed the nation’s new housing sector had recorded its sixth consecutive quarterly contraction in activity, with a nationwide downturn exacerbated by the COVID-19 crisis.

The value of work done on new houses in March 2020 was down 10 per cent on the same time last year, while the value of multi-unit construction was down 20 per cent, HIA said.

“The residential building industry had already experienced a significant downturn before COVID-19 struck,” HIA economist Tim Reardon said.

“Leading indicators of home building deteriorated markedly in April and May which paves the way for activity to fall further as the year progresses.”

Mr Reardon said additional checks and balances introduced by lenders in the wake of the coronavirus outbreak had created additional hurdles for the sector’s recovery, while calling on banks to do a better job to facilitate residential construction.

HIA forecasts released earlier this month showed new home building was likely to fall by around 50 per cent, with half a million jobs to be at risk over the next 12 months,

The HIA’s data followed Master Builders Australia outlining a $13.2 billion stimulus plan designed to create $30 billion in new economic activity and create more than 100,000 jobs.

A key element of the package would be a $40,000 grant for first homebuyers that purchase a new dwelling.

MBA chief executive Denita Wawn urged the National Cabinet to implement the stimulus package, which was based on economic modelling by EY, with the housing construction industry expected to be among those worst hit by the crisis.

“We know from previous downturns that it takes four times longer for our industry to recover than the rest of the economy,” Ms Wawn said.

“This economic crisis is not the result of market failure; it is the result of the lockdown imposed by governments in response to the public health emergency of COVID-19.

“Work for builders and tradies in 2020-21 is fast evaporating and the indications are that 2021-22 will not be much better.”

Real Estate Institute of Australia president Adrian Kelly, however, urged the federal government to consider the established housing market in any stimulus package.

While Mr Kelly acknowledged the new housing sector would be an important part of any economic recovery and a stimulus boost was appropriate, he raised concerns that assisting the purchase of new houses could be detrimental to buyer choice and overall market activity.

“Less than 20 per cent of Australian first homebuyers prefer to buy new homes,” Mr Kelly said.

“These choices are made on affordability of older dwellings in locations that provide proximity to work, leisure activities and infrastructure, including public transport.

“To limit any assistance to first homebuyers to only new dwellings could lead to suboptimal outcomes in the utilisation of existing property and infrastructure.”

Mr Kelly said another detrimental effect of limiting assistance to new dwellings would be a plunge in employment opportunities for real estate agents.

“Many agents are already reporting a 50 per cent reduction in listings and enquiry level from prospective sellers,” Mr Kelly said.

“The indications are that this is unlikely to change for quite some time yet, and will result in reduced employment in the sector when JobKeeper ceases.

“This would exacerbate the impact on agents who have been managing the fallout of tenants losing employment and negotiating outcomes that have kept families houses at the height of the pandemic.”