Australia is in danger of missing its housing supply targets as the nation’s dwelling commencements hit eleven-year lows, building groups warn.

Released on Wednesday, new data from the Australian Bureau of Statistics indicates that the seasonally adjusted number of dwellings that were approved for construction slumped by 10.4 percent in the September quarter to 37,116 – the lowest level on record since the June quarter of 2012.

Over the year to September, housing starts fell by 17.4 percent.

The latest data highlights challenges in achieving the national housing target of 1.2 million new homes over the five years from 1 July this year that was agreed to by National Cabinet last August.

To achieve these targets, around 240,000 homes will need to be delivered each year.

This equates to around 60,000 homes per quarter – well above current commencement levels as implied by the latest data.

Granted, there have been encouraging signs as building approvals have trended upward over recent months.

However, approval numbers remain low by historic standards.

As a result, commencements are likely to remain at low levels during the early part of this year.

Housing Industry Association Senior Economist Tom Devitt said that the weakness in current market conditions is particularly evident in detached housing.

By contrast, he said that conditions are improving in the multi-unit sector (units, townhouses and apartments).

Devitt warned that commencement numbers are likely to remain well below levels needed to achieve the target across calendar 2024.

He says government must act to unlock more housing supply.

“This data reveals there were 103,707 detached houses that commenced construction in the twelve months to September 2023, down by 17.0 per cent on the 124,940 commenced in the previous twelve-month period,” Devitt said.

“This points to a slow start to National Cabinet’s ambition to build 1.2 million homes over the next five years starting mid-2024.

“Since the RBA’s first cash rate increase in May 2022, sales of new homes have tumbled. A number of earlier projects are also being cancelled, with banks withdrawing finance in the face of soaring building costs and shrinking homebuyer borrowing power.

“This lack of new work entering the construction pipeline is expected to produce a trough in new house commencements in 2024, when Australia will start construction on just 95,400 new houses, the weakest year in over a decade.

“There was also a decline in the number of multi-unit projects commencing construction, down by 9.6 per cent in the September Quarter 2023 to just 13,916, one of the weakest quarters in over a decade.

“Multi-unit commencements are mounting a recovery on the back of population growth and land constraints, with Australia expected to commence 84,400 new multi-units in 2024.

“This would still put total detached and multi-unit commencements at less than 180,000 in 2024, far below the 240,000 per annum required to meet National Cabinet’s target.

“As fewer new projects begin construction, the pipeline of work that Australia’s home builders have under construction is expected to shrink rapidly this year.

“Meeting National Cabinet’s target will be largely dependent on the delivery of adequate private housing across the housing continuum. This will also have the biggest impact on the cost of housing and rental availability.

“Holding all levels of government to account for improving planning regimes, reducing red tape, and supporting the development of appropriate infrastructure and a skilled construction workforce, must be a priority this year.”


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