New housing approvals crash to lowest level since June 2013 amid warnings housing crisis will worsen
New housing approvals fell to their lowest levels in more than a decade in October as soaring interest rates, higher material costs and an insolvency crisis across the building industry hammered new projects.
Just 166,236 new dwellings were approved in the 12 months to the end of October, crashing below levels not seen since June 2013 when 165,325 homes were built, according to fresh seasonally adjusted figures released by the Australian Bureau of Statistics on Thursday.
Reacting to the latest figures, industry leaders warned the situation could deteriorate further in the months ahead.
“Unless we make concerted efforts to quickly boost housing supply and reduce the cost of building new homes, we will continue to see the housing and rental crisis worsen,” Master Builders chief executive Denita Wawn said.
“While some states and territories are making strides at the planning level, the federal government is adding extra cost layers to building through their new IR laws, undermining the efforts of housing ministers.”
Housing Industry Association senior economist Tom Devitt said the RBA’s punishing round of rate hikes had weighed heavily on the industry.
“Australian home builders had a significant pipeline of work under or awaiting construction when the RBA started increasing interest rates in May 2022,” Mr Devitt said.
“This pipeline has kept Australians employed and the economy going for over a year, obscuring the impact of the sharpest rate hiking cycle in a generation.
“This pipeline is now shrinking and in 2024 home builders will be starting construction on fewer new houses than at any time in the last decade.”
The sharp decline in housing approvals, which sank 6 per cent in the past 12 months, comes as Australians face a rebound in property prices, soaring rents and a glut of available properties.
The value of new housing has risen dramatically in the past 12 months. In October 2022 the average value for a new approved house was $430,000. By October 2023, this figure had risen by 12.5 per cent to an average of $464,000.
The fall in approvals for stand-alone housing was most acute, decreasing 8.1 per cent over the year, with just 100,678 homes approved for construction.
Tapas Strickland, head of market economics at NAB, said housing supply was being easily outstripped by the country’s surging population growth.
“While dwelling approvals are close to pre-pandemic rates, this is being far outpaced by the rapid increase in the population. International comparisons suggests the trend in Australian approvals is similar to offshore.” Mr Strickland said.
“With the annual dwelling approvals running at a similar pace to pre-pandemic at 166,000, and capacity constraints still evident in the wider construction, it is hard to see the housing industry being able to ramp up supply further without generating inflationary pressures.”
Separate data released by the ABS showed increased interest rates have failed to suppress investment intentions, with new data revealing businesses are poised to embark on an increase in capital expenditure in the new year.
Businesses are planning to outlay $171bn in capital expenditure, the figures showed.
The November capital expenditure forecast was $41.9bn higher than February’s, suggesting that businesses are increasingly confident of favourable conditions in the period ahead.
The data also showed a 0.6 per cent increase in business investment in the September quarter, weaker than market expectations of a 1 per cent rise.
Investment in machinery, plant and equipment, which will be factored into next week’s national accounts, rose by a modest 0.5 per cent.
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