Surge in demand for new homes as construction cost pressures ease

Demand for new homes is surging after a lacklustre year – and one property type is proving particularly popular among would-be buyers.

The latest New Homes Report from research firm PropTrack shows a 16 per cent increase year-on-year in search enquiries for new developments on realestate.com.au in July.

Boutique luxury apartments are especially in-demand, data shows. Enquiries for unit projects in inner Melbourne are the highest in the country.

The Victorian capital accounts for 34 per cent of all current residential construction projects in the country, with most underway in the inner-city.

Enquiries are the second highest on the Gold Coast, home to nine per cent of all current apartment developments.

Adelaide’s central and Hills regions have the most enquiries per development, but the number of projects underway in the city are particularly low, meaning more would-be buyers for fewer listings.

Analysis of demand shows premium unit complexes with rooftop swimming pools, wine rooms and gums are popular.

In July, Elysian Residences in Sherwood in Brisbane’s inner-south saw the most enquiries, followed closely by Murcia in Wollongabba in the inner-city.

The Walmer project in Melbourne’s Abbotsford came in third for the most enquiries sent by property seekers on realestate.com.au.

The New Homes Report also reveals the pace of building cost increases has slowed over the past year, with prices stabilising as supply chain issues improve.

Input prices rose by 0.6 per cent in the June quarter, which is the lowest increase in 18 months, Australian Bureau of Statistics data shows.

The cost of certain essential building materials, like concrete and plumbing products, has risen. However, the extent of those increases has been offset considerably by a slump in steel prices.

It marks good news for the construction sector, which has struggled through a tough period of time.

PropTrack senior data analyst Karen Dellow said the development of new dwellings slowed significantly over the past few years.

“The pandemic caused supply chain issues, increasing the price of essential building materials, which increased building costs, while labour shortages have also been a growing problem,” Ms Dellow said.

Frequent construction site shutdowns during Covid-19 stalled work and slowed down new home completions, she added.

“As a result, the higher cost of new properties led to decreased demand, compared to its peak in September 2021, when the government’s HomeBuilder Grant drove many property seekers to build houses to take advantage of the government subsidy.

“The combination of labour shortages and increasing prices has led to a backlog of work impacting the approval and commencement of future developments.”

However, ABS data shows easing construction costs might be helping to get work out of planning phases and into production.

There was a 14 per cent increase in new commencements in the March quarter, the latest figures reveal, totalling 46,546 dwellings. That has been driven by a whopping 57 per cent increase in apartment and townhouse commencements.