Housing approvals are continuing to recover throughout Australia but remain at low levels, new data shows.
Published by the Australian Bureau of Statistics, the latest Building Approvals report shows that the seasonally adjusted number of new dwellings that were approved for construction edged up by a further 1.6 percent in November to reach 14,529.
At this level, approvals remain low compared with the past decade (see chart) but are almost 20 percent higher compared with their trough in January last year.
The result was driven by a 6.7 percent rise in approvals in the statistically volatile multi-unit residential sector (units, townhouses, apartments etc.).
Approvals in the more statistically stable detached house sector contracted by 1.7 percent during the month.
Nevertheless, the latest data provides further evidence of a stabilisation in approval numbers which has taken hold since numbers bottomed out in January last year (see charts).
Indeed, approvals now appear to be on a modest upward trajectory.
All up, seasonally adjusted approvals have risen during three out of the past four months and during six of the past ten months (see chart).
Despite this, industry economists greeted the result with caution.
Housing Industry Association Chief Economist Tim Reardon said that the relatively low levels of approvals will see the number of commencements on new homes continue to slow in 2024.
This will create significant challenges in meeting the Commonwealth housing target of 1.2 million homes over five years from July 2024.
“The low volume of building approvals throughout 2023 will see the volume of homes commencing construction continue to slow this year,” Reardon said.
“Other leading indicators of activity in the housing market, such as new home sales and housing finance data, are also consistent with their confirmation of this projected slowdown.
“The rise in the cash rate is the primary cause of this slowdown in approvals.
“A continued fall in the number of new homes approved indicates a slow start to the Australian government’s ambition to build 1.2 million new homes in five years starting mid-2024.”
Master Builders Australia Chief Executive Officer Shane Garrett expressed similar sentiments.
Garrett says that several factors are creating impediments to new home building.
“Today’s figures mean that just 945,554 new homes have been approved across Australia over the past five years.,” Garrett said.
“Master Builders has forecast that 2023-24 will see around 170,100 new homes built, well below the 240,000 needed per year to meet the 1.2 million housing accord targets.
“However, there was a modest 1.6 per cent increase in the overall number of new home building approvals during November 2023 thanks to a 7.2 per cent gain in higher density approvals.
“More higher density building will help alleviate some of the pressure in the rental market which has seen big inflationary impacts in the economy.
“Labour market shortages, lack of shovel-ready development, planning delays and interest rate rises continue to be the biggest impediments to home building.”