Building approvals have fallen to eleven-year lows as Australia’s housing construction downturn continues, new data shows.
Published by the Australian Bureau of Statistics, the latest data shows that the seasonally adjusted number of new homes and multi-unit dwellings that were approved for construction throughout Australia slumped by 8.1 percent in April to 11,594 – the lowest level on record since April 2012.
The decline was comprised of a 3.8 percent fall in detached house approvals along with a 16.5 percent slump in multi-unit approvals (units, townhouses, apartments).
In the detached house sector specifically, approvals have continued their downward trend which followed the peak of the HomeBuilder boom in March 2021 (see chart).
Such a contraction has gathered pace since August last year as the impact of interest rate rises began to take effect.
Since August, detached house approvals have contracted during seven of the past eight months and have fallen by almost 23 percent.
In the multi-unit sector, caution should be observed when interpreting single monthly readings on account of the statistically volatile nature of approvals in this sector.
Nevertheless, four consecutive months of soft readings (see chart) suggest that conditions in this sector are very weak.
Indeed, at 16,368 (seasonally adjusted), the multi-unit sector has registered its weakest start over the first four months of the year compared with any other year since 2012.
The latest data comes as Australia’s home building sector has been impacted by soaring interest rates and massive increases in cost – although the pace at which costs are increasing has slowed.
Since May last year, official interest rates have shot up from 0.1 percent to 3.85 percent as the Reserve Bank of Australia has sought to contain inflation.
Meanwhile, Producer Price Index data from the ABS indicates that the cost of construction for detached homes has increased by 29.6 percent over the two years to March 2021.
All this has impacted consumer demand, developer financing costs and project viability.
The latest data comes as Housing Industry Association last week forecast that dwelling commencements will continue to contract throughout the remainder of 2023 before bottoming out in the March quarter of 2024.
Housing Industry Association Senior Economist Tom Devitt expressed concern at the continued decline in approvals.
Devitt warned that the low dwelling construction numbers will exacerbate affordability challenges.
“Building approvals in April 2023 remained at their lowest level in over a decade, with declines continuing for both houses and multi-units,” Devitt said.
“Detached house approvals declined by 3.6 per cent in the month of April and multi-units fell by 16.9 per cent.
“On a quarterly basis, this leaves detached house approvals 15.4 per cent lower than the same time the previous year, and multi-units down by 38.9 per cent.
“This continues the long-lagged response of Australian homebuyers to the RBA’s interest rate hiking cycle, with further declines expected in the coming months.
“The combination of construction cost blowouts, labour uncertainties, increased compliance costs and taxes on investors has seen approvals for multi-units fall.
“These disappointing approvals numbers are occurring as population growth surges with the return of overseas migrants, students and tourists.
“This imbalance will see the affordability and rental crisis deteriorate further.”
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