Home buyers are undeterred by the prospect of new builds, snapping up more house and land packages than before COVID-19 even though building a new home is costing up to 10 per cent more and taking months longer to complete.
Surging prices for established houses have prompted first-home buyers, upgraders and investors to secure more affordable house and land packages, and record low interest rates have further buoyed demand.
House building approvals are up by 3.5 per cent nationally in August to 12,009, sitting well above the 8458 recorded at the same time in 2019, before coronavirus struck, the latest Australian Bureau of Statistics figures show.
House and land buyers have even been active through Melbourne’s record lockdown, with figures from real estate services group Oliver Hume showing a 30 per cent jump in reservations (a payment for securing a block of land) in September, compared to August.
The national general manager residential housing at Burbank Homes, Louis Sultan, said the market had been increasingly busy as coronavirus-related lockdowns in both Sydney and Melbourne began to ease.
“In Queensland it’s been a very, very busy time in terms of sales,” Mr Sultan said. “But they haven’t had the lockdown scenarios of Sydney or Melbourne.”
The extra work comes despite costs for building rising by around 10 per cent for a single-level home, and 5 per cent for a double-storey, since February. Costs have also been rising for trades and labour on builds.
Adding to the challenges, timber frames and glass have been in short supply, seeing slabs poured but further building delayed by up to five months, Mr Sultan said.
However, this hasn’t dampened the desires of those looking for their first home, or a bigger one.
Timber shortages have caused delays to starting home builds. Photo: iStock
Oliver Hume national head of research George Bougias said the challenges faced by the industry had not put off buyers of house and land packages.
“I think people are taking it in their stride and with record-low interest rates people are intent on capitalising on that,” Mr Bougias said. “There’s still a lot of energy wanting to be expressed in the market [after lockdown] and land prices have gone up quite a bit.”
Some buyers were rushing into the market, not only because house and land packages were much more affordable than many inner-city homes.
The Australian Prudential Regulation Authority announcement that it was tightening lending criteria at the end of the month could make it more difficult for some buyers to get a mortgage.
“Some people are rushing to get loans approved and do everything sooner,” Mr Bougias said. “I think overall APRA changes will have a modest impact on the market.”
While more buyers were coming into the market, the type of buyer had been changing. More of those looking for a bigger home, or bigger home office, had been buying house and land packages over the past few months.
As had investors, looking for a better deal than they could get in the expensive inner-city markets.
“The number of upsizers has increased. They’re actually looking for something where they’re not living on top of each other and have bigger home offices,” Mr Sultan said. “That demographic has increased by 40 per cent.”
HIA chief economist Tim Reardon said the number of sales remained strong after a bumper year last year, with the HIA expecting 146,000 new homes to be built this year.
Last year, the home building industry was inundated with house and land sales, when the federal government’s HomeBuilder grants of up to $25,000 were taken up by more than 109,000 people before the scheme ended in April.
“Why is there such strong demand for housing? Because there was such little housing before COVID,” Mr Reardon said. “The market had been constrained for so long – what’s happened in two years is a catch up on 20 years of under-building.”
Like many in the real estate sector, Mr Reardon said he expected the market to spark up again once state and international borders reopened and migrants returned by the end of the year. He also expected the challenges of finding timber and other materials to build homes to ease by the end of 2022.
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