New home building will plunge by 43 per cent in the next thirteen months, putting half a million jobs at risk, according to an industry body.
The Housing Industry Association this week projected that in the 2020/21 year just 112,000 new homes would start construction. That's compared to almost 200,000 new homes started in the last financial year.
The dramatic drop is attributed to the slowdown in the economy due to the coronavirus pandemic.
"The shock to the economy from the halting of overseas migration, the absence of student arrivals and uncertainty over the domestic economy will see the market at a lower point in December 2020 than it was during the 1990s recession," said HIA managing director Graham Wolfe.
"It will then continue to decline through 2021, even with the return of overseas students and migration."
The loss of immigration and international students would kill the demand for rental accommodation, according to Wolfe, and therefore appetite for investors to build new housing.
"The 625,000 overseas students enrolled in Australian education institutions equates to demand for the past two years of apartment construction," he said.
"It is not clear how many of these left in March or how many will return."
The collapse in construction demand will put 500,000 jobs at risk, according to HIA estimates.
“This shock will reverberate through the residential building industry, up and down the supply chain. Employment in the sector is not expected to recover within the next two years."
The HIA projection is even more pessimistic than modelling from the Master Builders Association, which forecast that as many as 43,000 new homes would not be built in the coming year.
The Commonwealth Bank last week also forecast pain for the housing market, predicting a 32 per cent drop in values due to crushed demand. This equates to about a $285,000 loss for the median Sydney house.
Wolfe urged governments to put aside debt concerns to prevent a catastrophic malaise.
"The nature of this shock requires significant and ongoing support from policymakers in Australia and amongst our trading partners," he said.
"The risk that insufficient support will produce a decade of deflation, depression and human hardship, is present."
While acknowledging the building industry has been fortunate enough to continue operating in some capacity during the lockdown, the real trouble would come later this year.
"Many small builders will not be eligible for the program as the downturn will impact the sector most significantly from September 2020 when the majority of projects under construction are completed," said Wolfe.
"Drawing forward housing demand can also play a role in alleviating the emerging shock to new home construction and the wider economy. Traditionally, Australia has done this through empowering consumers to build new homes."