Housing construction starts in Australia fell to their lowest level for eleven years in 2023, new data shows.

And the current rate of housing completions remains well below that required to meet Commonwealth housing targets.

The Australian Bureau of Statistics has released the December quarter edition of its Building Activity report.

On a seasonally adjusted basis, the report indicates that dwelling commencements edged by 1.3 percent during the December quarter but remain at extremely low levels of 38,397.

This occurred as a 2.7 percent decline in commencements for multi-unit residential dwellings was offset by a 3.0 percent increase in detached house commencements.

On a calendar year basis, dwelling unit commencements dropped by 10.5 percent to fall from 182,465 in calendar 2022 to just 163,285 last year.

This represents the lowest level of annual commencements over any calendar year since 2012.

At this level, annual commencements in 2023 were 29.2 percent lower compared with the peak in commencements (230,730) which occurred during the detached home building boom in calendar 2021.

Meanwhile, the data showed that the number of new homes which are being delivered is far below that required to achieve national housing targets which are set under the National Housing Accord.

Under that Accord, Commonwealth and State Governments are aiming to deliver 1.2 million homes over the five years from 1 July 2024.

This equates to an average of 240,000 homes per year or 60,000 homes per quarter.

However, the latest data shows that only 43,332 homes were completed in December quarter whilst only 172,725 dwellings were completed across calendar 2023.

Moreover, doubts that the targets will be met continue to grow.

In its latest forecast released on Wednesday, Master Builders Australia said that it expected the actual number of homes delivered to fall short of the aforementioned target to the tune of 110,000 homes.

Finally, the report shows that the pipeline of work is easing slowly but surely.

As at December 31, the ABS estimates that Australia had 226,035 dwellings under construction.

This remains extremely elevated by historic standards but is less than the 243, 456 homes that were under construction at the peak of the detached home building boom in the September quarter of 2022.

Such an easing will likely mean that pressures especially in terms of skilled labour availability may be easing.

The latest data comes amid growing levels of concern that subdued building activity will further exacerbate housing affordability challenges.

The current subdued activity levels are being driven by a combination of higher interest rates and higher construction costs.

They come despite a current housing shortage which has seen the national rental vacancy rate fall to record lows of just 0.7 percent.

Master Builders Australia Chief Economist Shane Garrett said that there is a concerning mismatch between a lack of new housing commencements on one hand and a severe shortage of rental properties on the other.

Meanwhile, Master Builders Chief Executive Officer Denita Wawn said that builders are struggling to make project feasibility stack up amid higher interest rates and rising construction costs.

Wawn urged governments to clear any regulatory barriers which add to the time and costs associated with delivering new projects.

“When it comes to signing new contracts, the pen is not making it to paper as the investment does not stack up,” Wawn said.

“Since 2019 we have seen the cost of home building increase by 40 per cent.

“Governments need to work to change this. The cost of delivering projects needs to go down and the time to completion must be shortened.

“To achieve these targets, builders are ready to take on the challenge, but clearing the barriers on the road is necessary to get the job done.”

Meanwhile, Tom Forest, CEO of the Urban Taskforce, described the data as a ‘wake-up call’ for the Albanese Government.

Forest acknowledged efforts of states to reform planning systems but said the Commonwealth had done little beyond its efforts with the Housing Australia Future Fund.

In particular, Forest called on the Commonwealth to do more to provide the supporting major infrastructure which supports the delivery of new homes, communities and employment centres.

He called on the Government to allocate billions of dollars to housing and job-enabling infrastructure projects over coming years.

“The Albanese Government needs to be more than a bit part player in housing supply,” Forrest said.

“It must use next month’s Federal Budget to allocate billions of dollars towards housing and job enabling infrastructure projects across Australia.”

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