11-year low in building approvals to exacerbate rental and housing crisis
- The ABS have revealed the construction of 12,686 new dwelling units were approved in March.
- According to the HIA, this means the quarterly number of new approvals was the lowest since 2012.
- HIA Economist says this means the housing affordability crisis is likely to get worse.
The construction of 8,312 new private sector houses were approved in March, down 2.8% from February and 15% less than in March '22.
The overall number of dwelling units approved was 12,686, only 0.1% less than February, but 17.3% lower than March '22.
ABS head of construction statistics Daniel Rossi said this is the sixth consecutive month of approvals falling, and private sector house approvals remain 15% lower than March 2022.
The Housing Industry Association (HIA) says this means the March quarter had the lowest number of building approvals since 2012.
HIA Senior Economist Tom Devitt says low building approvals is likely to escalate these problems.
"These disappointing approvals numbers are occurring as population growth surges with the return of overseas migrants, students and tourists," Mr Devitt said.
"This imbalance will see the affordability and rental crisis deteriorate further."
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Why won't supply meet demand?
The number of new listings for both rentals and properties for sale has been persistently low in recent months.
CoreLogic says the four week average for new capital city rental listings in April was 20.9% below the same time last year, and 39.8% less than the previous five year average.
Many have also pointed to well below average numbers of new properties for sale as an explanation for how the property market has held up far above expectation so far this year.
"The trend decline in dwelling approvals stands in stark contrast to population growth. The latest civilian 15 years plus population data show an increase of 482,000 over the past year, while the rolling annual level of approvals is running at 180,900 - and the three-million annualised level of approvals is even lower at 150,500," said Taylor Nugent, NAB markets economist.
"That has taken the new population per approved dwelling approval to 2.7 persons, its highest since the very peak of the mining boom. With new dwelling supply set to lag population, the rental market will remain tight and an increase in average dwelling size will be needed for that tightness to moderate."
The HIA's Mr Devitt says the lack of building activity can be attributed to several things.
"The combination of construction cost blowouts, labour uncertainties, increased compliance costs and taxes on investors has seen approvals for multi-units stall," Mr Devitt said.
Much of the problems can be traced back to the issues the pandemic caused the building industry.
Historic low interest rates, a surge in migration to regional areas, various fiscal stimulus packages and renovations/rebuilds for houses damaged by natural disasters all combined to create what the HIA said was an unprecedented demand for home building.
At the same time though, the pandemic was severely restricting the output of construction companies.
Lockdowns and restrictions forced manufacturers to scale back output of materials, which were then subject to increased delays and freight costs.
The number of workers on a site at any one time was also limited, causing further delays that caused a backlog of construction projects still being worked through.
Consequently, construction expenses went through the roof, and prospective developers also have to deal with the heightened cost of borrowing thanks to the cash rate increases.