Home Approvals Drop as Australia Faces Housing Shortage

Hotspotting

The latest Australian Bureau of Statistics data has recorded a decline in the number of dwelling approvals across the country.

Total dwelling approvals saw a drop of 6.1 per cent in the month of August, at a time when Australia needs to be building a lot more homes.

According to ABS head of construction statistics, Daniel Rossi, private dwellings excluding houses were the main contributor to the decline – in other words, there has been a big decrease in approvals for attached dwellings like units and townhouses.

This has resulted in a 16.5 per cent fall in approvals for those types of attached dwellings.

Furthermore, the value of total residential building fell 6.7 per cent to $7.96 billion while the value of non-residential building rose 11.5 per cent to $5.30 billion.

The numbers suggest that there’s a lot of construction projects happening in Australia but not enough of them are new dwellings in a nation that has a severe shortage.

A lot of government resources are being directed into big infrastructure projects, and a lot of tradespeople are working on these projects, when the nation really needs these resources to be going into building new homes.

One of the measures of construction activity in Australia is the number of cranes on the skyline.

The infrastructure boom has pushed the total of non-residential cranes across the nation to a record 370, while slumping investment in new housing has reduced the number of residential cranes to a two-year low in the latest report on the country’s construction sector.

The infrastructure boom is keeping construction costs high and making it harder for private projects to stack up, according to Domenic Schiafone, the head of research for quantity surveying firm RLB, which produced the report.

Other data shows that in the 2024 financial year, the number of new homes built in Australia fell 9% to the lowest level since 2011.

If the current rate of building continues, Australia will build around 800,000 over five years, when the Federal Government target is 1.2 million new homes – a figure that was never realistic and looks, now, increasingly fanciful.

HIA chief economist Tim Reardon agrees there are many challenges making dwelling development difficult. According to Reardon, rising taxes for foreign investors and rising regulatory costs generally are negatively impacting building approval figures.

Reardon notes that house approvals in Perth and Brisbane are faring much better than in Sydney and Melbourne.

He says confidence in the Melbourne new home market has been adversely impacted by two new taxes, while policy debates generated by recent Federal Government actions are making it harder for the industry to achieve the national target of 1.2 million new homes.

Reardon says: “Recent discussions on negative gearing and capital gains tax arrangements for residential property are undermining confidence in new home building. The government’s focus should be on lowering the taxes, regulatory costs and excessive charges that make up as much as 50 per cent of the final cost of a house and land package.”

That’s worth repeating – that, in some parts of Australia, up to half of the cost of a house and land package comprises the taxes, fees and charges imposed by government.

The official figures show that total housing starts for the year to June totalled about 159,000, which is 81,000 homes short of the 240,000 the country needs to be building each year to meet the government’s increasingly aspirational 1.2 million-home target over the five years to 2029.

If building continues at this pace, Australia will build less than 800,000 new homes over the next five years – 400,000 short of the government’s target.