Capital Expenditure on Private Dwellings

IBISWorld forecasts capital expenditure on private dwellings to decline by 3.0% in 2023-24, to total $103.7 billion. Rising interest rates are expected to raise the cost of borrowing and constrain capital expenditure on private dwellings. Dwelling commencements and residential building construction activity are both expected to drop in the current year as consumers cut back their borrowing amid inflationary pressures. Nonetheless, the continued easing of unfavourable trading conditions tied to the COVID-19 pandemic are anticipated to limit the decline in capital expenditure on private dwellings.

An oversupply of apartments across major capital cities was a major contributor to declines in dwelling expenditure over the two years through 2019-20 as some apartment projects were deferred or cancelled. Additionally, economic uncertainty in the early stages of the COVID-19 pandemic weighed on residential construction activity and further contributed to declines in capital expenditure on private dwellings in 2019-20. A slump in capital expenditure on private dwellings that accompanied the pandemic-led recession in 2019-20 gradually recovered as a combination of factors saw capital expenditure on private dwellings rise over the two years through 2021-22. These factors included the Federal Government’s HomeBuilder scheme and low interest rate environment which encouraged greater investment in private dwellings. The Federal Government’s HomeBuilder scheme, which provided first home buyers a grant to build a new home or substantially renovate an existing home, continued until March 2021. This spurred growth in alterations and additions, as well as expenditure on new and used dwellings.