Tough Times Ahead for the Australian Housing Construction Industry as Timber Demand-Supply Mismatch Persist

0
160

The booming housing construction industry is currently beleaguered by record demand, supply constraints and rising prices with no respite anytime soon.

Australia’s detached housing and renovation markets are experiencing their strongest ever activity. This has presented the industry with many challenges.

Supply of Timber is Constrained

The production of timber in Australia has not kept pace with demand over the past two decades and, the country has to depend on imports to meet its requirements. Around 20% of timber used in the construction of the detached homes from 2016 to 2019, was imported.

In a typical year importing timber hasn’t been a problem, however, with the onset of covid-19 pandemic in 2020, multiple issues have emerged including constrains on international shipping. Domestic supply was also affected because of lockdown and bushfires. These supply issues coincided with a surge in demand for framing timber in Australia as well as in global markets pushed timber prices significantly.

In 2018, when housing demand was high, the European and the US markets were relatively soft, ensuring their excess timber production became available. But that is not the case in 2021. In any other year, timber mills in Australia and Europe have weeks if not months of production on the ground, ready to transport but currently, their stocks are almost nil. 

The demand for Timber is Unprecedented

Detached housing starts in Australia and across the world are at record levels.

Many industry experts like Bowens, believe that the problem is on the demand side. Demand for detached housing has significantly increased over the years leading to major renovation boom.

The Housing Industry Association (HIA) anticipates a 26.9% increase from the previous year in new detached home commencements in 2021. The significant increase in demand combined with a boom in renovation work is adding to the large volume of construction activity which is drawing significantly higher volumes of timber products than ever before.

It normally takes a number of months for timber production to increase to meet this rise in demand as additional milling capacity is commissioned. Consequently, demand for timber has outstripped the capacity of timber producers globally.

State and Federal Government incentives for the building and construction industry, such as HomeBuilder Grant, have delivered a much-needed boost in the face of the covid-19 pandemic. These incentives have generated billions of dollars in economic activity and helped to secure the viability of thousands of businesses and jobs through this pandemic.

More information on timber shortage for home building is available on the report released by the HIA.