Total dwelling approvals fell to 11,594 in April, an annual drop of 24.1%.
Over the month, private sector houses were down 3.8% to 7,939 approvals while private sector dwellings excluding houses were down 16.5% to 3,469 approvals.
Dwelling approvals across the states varied, with notable declines in Queensland, -22.8%; Victoria, -18.6%; and Western Australia, -5.8%.
Total approvals are now at the same level as in April 2012, when there were 3 million fewer people in the country.
The property sector appears to be crumbling amid high inflation and 11 increases to the cash rate. That’s despite the government expecting a record 400,000 overseas migrants to enter the country this financial year, and another 315,000 in 2023-2024.
With a surge in migrants inevitable, new dwelling supply is set to lag population growth for some time.
Why are building approvals dropping like flies?
Housing Industry Australia (HIA) Senior Economist Tom Devitt said there’s not just one factor contributing to a lack of new supply.
“The combination of construction cost blowouts, labour uncertainties, increased compliance costs and taxes on investors has seen approvals for multi-units fall,” Mr Devitt said.
“These disappointing approval 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.”
CommBank Senior Economist Belinda Allen agreed with Mr Devitt, also noting the large backlog of work yet to be completed.
“The interest rate hiking cycle, labour shortages, higher costs and administrative challenges are all reasons cited for the delays,” Ms Allen said.
“The second issue is that past approvals are not being completed.
"There remains a large pipeline of work yet to be done, and not yet commenced which is delaying new housing to the market. The length of time between approvals and completions is also getting longer.”
What does the future hold for housing supply?
With building approvals at their lowest at a time when we need them to be at their highest, the question remains: where to from here?
NAB Economist Taylor Nugent said the outlook for new dwelling construction looks bleak.
“A sharp pick up in housing supply is unlikely in the near-term given the trend in building approvals (even with the backlog of work being completed), and so will provide little relief for current challenges in the housing market,” Mr Nugent said.
“Higher prices for rents and dwellings will see some adjustment to residential space per person and the number of people per dwelling.
“During the pandemic, average household size fell as people demanded more space. Some reversal to that shift in preferences would also ease some of the current pressures, leaving less adjustment to be made through binding affordability constraints meeting rising prices.”
Westpac Senior Economist Matthew Hassan said the only thing preventing building approvals from falling even further is the 240,000 dwellings that are still under construction as of December.
“Whether this is a ‘saving grace’ or a ‘curse’ depends on your point of view,” Mr Hassan said.
“Much of this backlog is activity associated with the Federal HomeBuilder stimulus during COVID that would have originally been quoted on ‘fixed price’ terms but has since become either unprofitable for the builder, renegotiated at a significantly higher cost or simply shelved.
“The stabilisation being seen in the wider housing market may eventually flow through to construction activity but it's likely to be ‘too little too late’ to prevent a very difficult year for the residential building sector near term.”
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