The Reserve Bank of Australia expects population growth to revert to close to pre-pandemic patterns by 2024, but projections do not envisage any catch-up in the numbers lost during the period of closed borders.
“This implies that the population level is on a permanently lower track than would have been expected had the borders not been closed,” RBA assistant governor for economics Luci Ellis told a conference in Sydney on Wednesday.
“It will take a little while for students and other migrants to return in the numbers that were seen before the pandemic.”
She told the Urban Development Institute of Australia 2022 national conference that in terms of housing, the usual pattern of net population flows is that migrants from overseas are more likely to arrive in Sydney and Melbourne.
“This net flow into those cities more than offsets the usual net outflow of residents to other parts of Australia, especially Queensland,” Dr Ellis said.
However, she said the desire for more space further from the office during the COVID-19 pandemic might wane over time as memories of lockdown start to fade.
Also not everyone who sought a “tree change” in the regions will find that to be the right choice in the long term.
But the expectation is that construction of new homes will remain solid for the next couple of years.
“We expect it will expand at rates similar to the first decade of this century, but not as much as during the boom in apartment building in the second half of the 2010s,” she said.
“This is likely to still be enough to keep the housing stock growing faster than the population.”
That said, all the signs point to a residential construction industry that is at capacity and cannot run down its pipeline of work any faster, and this has nothing to do with land availability or governments approving enough homes,.
“We hear from liaison contacts in the construction industry that delays are common,” Dr Ellis said.
“Normally, a detached home takes about six months to build. Currently, they are telling us that it is averaging around nine months.”
Some of these delays relate to the availability of materials with supply-chain disruptions around the world impinging on a range of building materials, especially steel and timber but including everything from tiles to appliances.
“Availability of labour is also an issue, especially in Western Australia, but this is not specific to construction,” she said.
She expects the short-term fillip to demand from initiatives such as HomeBuilder and other temporary support measures will work its way out of the pipeline.
“As interest rates increase, the boost to demand from the current low interest rates will also wane and the shifts in demand stemming from the pandemic will have worked their way through,” she said.
Over the next week the Australian Bureau of Statistics will release a series of economic figures that contribute to the overall national accounts result on June 1, kicking off on Wednesday with March quarter construction data.
Economists’ forecasts point to a 0.9 per cent increase in construction work completed in the quarter, recovering from a 0.4 per cent decline in the previous three months.
