Australia’s housing supply outlook has darkened after approvals tumbled in August, prompting warnings that the nation could fall well short of its new-home targets.
Australia’s housing supply outlook has deteriorated after apartment and townhouse approvals tumbled in August, prompting Master Builders Australia to warn that a mounting combination of cost, finance, and policy pressures could leave the nation well short of its new-home targets.
The latest Australian Bureau of Statistics (ABS) figures showed that total dwelling approvals fell 6.1 per cent to 16,953 in August, as a sharp retreat in higher-density projects outweighed another monthly gain in detached-house approvals.
Private-sector house approvals rose 3.7 per cent to 10,885 in seasonally adjusted terms, leaving them 18.4 per cent higher than a year earlier.
ABS head of construction statistics Daniel Rossi said the result extended a sustained period of activity in detached housing.
“This marked the eighth month in a row with more than 10,000 private-sector houses approved across Australia,” Rossi said.
However, approvals for private dwellings excluding houses fell 21.2 per cent to 5,674 after a 0.8 per cent lift in July.
The category includes apartments, townhouses, terraces, and semi-detached homes, and it was 2.1 per cent lower than in August last year.
In original terms, apartment approvals dropped 24.9 per cent to 3,268 dwellings, nearly one-fifth below their 12-month average of 4,074.
Townhouse approvals fell 20.7 per cent to 2,546, sitting 11.3 per cent below their 12-month average.
The broader state results reflected this uneven picture, with total dwelling approvals falling in Queensland (-22.5 per cent), NSW (-17.3 per cent), and Tasmania (-1.5 per cent), while gains were recorded in South Australia (+24 per cent), Victoria (8.9 per cent), and Western Australia (+3.2 per cent).
Meanwhile, detached-house approvals increased in South Australia, Western Australia, Queensland, and Victoria, with NSW the sole state to record a fall.
Forecasts cut as pressures collide
Master Builders Australia said the approvals data sat against a deteriorating national construction outlook, with the industry body downgrading forecasts across residential, non-residential, and engineering construction since its March modelling.
The association now expects fewer than 920,000 new homes to commence over the five years to 2030–31, an 8.4 per cent reduction on its March projection.
Master Builders said that downgrade represented 62,000 fewer starts than previously anticipated and would leave a 262,000-home deficit over the full National Housing Accord period.
Chief economist Shane Garrett said new-home construction was being squeezed by a damaging combination of weaker market conditions, high costs and financial pressure, limiting builders’ ability to respond to Australia’s supply shortage.
“New home builders are in the eye of a perfect storm. It’s much harder to sell new homes when established dwelling prices are on the way down. This is made worse by the fact that builders have no room to reduce their costs because of the pressures arising from tradie shortages and escalations in the price of key building materials,” Garrett said.
“Interest rate rises have eroded prospects for new homes and made it much more expensive for our homebuilders to carry out work. Our economy’s abysmal productivity performance raises the risk that several more hikes will be needed to quell inflation. If this happens, prospects could worsen further.”
Master Builders chief executive Denita Wawn framed the forecast downgrade as evidence that government policy settings were worsening the housing supply problem.
“Modelling confirms that the budget will deprive us of many new homes over the years ahead, and force rents even higher,” she said.
“The federal budget tax changes that are pulling down supply and jeopardising the financial viability of projects, especially in the higher-density sector, must be reversed.”
Pipeline still masking slowdown
Housing Industry Association (HIA) senior economist Tom Devitt took a more measured view of the latest approval figures, arguing detached-house activity still reflected momentum built before this year’s deterioration in conditions.
“House approvals over the last three months sat 14.6 per cent higher than the same quarter last year, reflecting the market’s momentum heading into this year,” Devitt said.
But Devitt cautioned that approvals data could lag the pressures now affecting new-home sales and project feasibility.
“There are long lags in home building, and it is still too soon to see the impact of this year’s speed bumps on building approvals data,” he said.
“We are unlikely to see the impact of recent events on approvals and on-the-ground commencements until next year and beyond, when Australia will build fewer homes than previously expected.”
[Related: UDIA warns SMSF and budget changes threaten supply]
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