By James Glynn


SYDNEY – Australia’s homebuilding boom is expected to continue for some time, even as construction companies operate at full capacity and battle supply constraints to complete an unusually large order pipeline.

The time to build a house has risen to an average of around nine months from six months, as domestic capacity constraints are compounded by global bottlenecks that have affected timber and steel supplies , said Luci Ellis, deputy governor of the Reserve Bank of Australia. in a speech Wednesday.

“There is now an unusually large pipeline of single-family homes that have yet to be completed,” Ms Ellis said. “All signs point to the residential construction industry being at capacity and unable to work any faster in this pipeline.”

The RBA is facing soaring inflation, prompting it to raise official interest rates for the first time in more than a decade in early May. Household construction costs are a key factor pushing inflation to its highest level in 20 years.

The outlook for housing construction suggests that the cost spike will continue for some time.

According to the RBA’s Business Liaison process, which helps inform decisions on interest rates, about a fifth of businesses say availability of materials is a significant constraint on their production.

“That’s much higher than what’s been reported for the past three decades,” Ms. Ellis said.

Labor availability is also an issue, particularly in Western Australia, but it’s not specific to construction, she said.

Australia’s unemployment rate has fallen to its lowest level since 1974 as job vacancies hit record highs. The RBA expects wage growth to pick up by the end of the year.

Ms Ellis said capacity constraints are also evident in non-residential construction, where the pipeline of work to be done is at the upper end of its normal range. The pipeline of planned public infrastructure projects is also quite large.

“It seems like all segments of the construction industry are making relatively heavy demands on the same material and labor resources at the same time,” Ms. Ellis said. “So it’s no surprise that the pipeline remains large, cost pressures are compressing margins and delays are longer than usual.”

The Housing Industry Association, an umbrella group for housing construction companies, said on Tuesday that the homebuilding boom will stretch through mid-2023.

There were 75.7% single-detached homes under construction at the end of 2021 compared to the pre-Covid period, and a record number of homes approved and awaiting start-up, HIA said.

Soaring housing construction costs have made Australia’s inflation problem significantly worse, but they are unlikely to subside soon, HIA said.


Write to James Glynn at james.glynn@wsj.com