Building approvals in Australia at decade lows — what does this mean for the housing crisis?

Building approvals in Australia at decade lows — what does this mean for the housing crisis?
  • PublishedJune 8, 2024

Decade-low building approvals could spell disaster for the future of the Australian government’s ambitious plans to tackle the worsening housing crisis, property experts say.

New statistics released by the Australian Bureau of Statistics show the total number of dwellings approved in April fell by 0.3 per cent from the month prior.

Approvals were also down in three out of the seven states.

Australian Housing and Urban Research Institute’s Dr Michael Fotheringham said April’s figures were in keeping with a broader trend in the country’s struggling building sector.

“There’s a downward slide in the number of approvals overall in recent months, which reflects a couple of things,” he said.

“There’s a tapering off of consumer confidence in investing and building a new home, with interest rates and cost-of-living pressures making it a difficult decision for people.

“That’s also particularly driven by significantly increased costs in housing construction.”

Dr Fotheringham said an interesting aspect of the data related to the value of approvals.

He said while the number of approvals had declined, their value had remained relatively stable.

“We’re investing about as much money — we’re just getting less houses for it.”

An aerial photo of a new housing estate with empty blocks and several new houses being built.
Approval for new builds are experiencing a record low.( ABC News: Peter Drought )

“That’s not a helpful trend, given the broader lack of housing supply and the ambitious targets we have — we’re not keeping pace with with the rate of construction we need,” Dr Fotheringham said.

The figures come just a month after the federal government pledged $9.3 billion to the states and territories during the next five years to achieve its new national housing target.

Measurement of the target is due to start on July 1.

The National Housing Accord aims to build 1.2 million new homes across Australia by 2029 — a number that has been described as “ambitious” in the property sector.

The Property Council’s group executive Matthew Kandelaars echoed Dr Fotheringham’s concerns about the broader trend.

A man in clear frame glasses, a grey suit jacket and white shirt
Matthew Kandelaars said April’s figures and the overall downward trend in approval figures were reflective of the industry dealing with a number of challenges.(Supplied: Property Council of Australia)

“The reality is conditions are challenging,” he said.

“We’ve got costs of construction that are high, we’ve got costs and availability of labour, which is an ongoing challenge for the industry.

“We’ve got state and territory planning systems which are, by and large, stuck in the 1980s. 

“We’ve got tax systems around the country which actively discourage global investment into Australian housing. 

“And that makes it incredibly difficult for the property industry.”

Dr Michael
Dr Michael Fotheringham.(Supplied: AHRUI)

Dr Fotheringham said it was important to consider the data in context.

“The bigger concern is actually around not so much the approvals, but the next step of actually getting on with the construction and then occupancy,” he said.

“Often, industry critics will will complain that approvals or lack of approvals are holding them up, as though the planning system is preventing housing supply. 

“The widest set of data we can look at suggests that’s not the break on the system — it’s a lack of people moving forward with it.

“So even if there’s an approval for a site, it doesn’t mean it’s commenced.”

Is the national target too ambitious?

Mr Kandelaars said April’s latest housing approval figures show there’s still much to be done to start building houses in Australia.

“There’s no question that the target is ambitious,” he said.

“It will take a great deal of work and a great deal of partnership between all tiers of government and industry to make sure that we can get as close as we possibly can to the targets.”

He said allowing scaled institutional investment would be key to addressing the target, and the government needed to act quickly to be ready for July 1.

Dr Fotheringham said if the downward trend continued, it could be concerning for the federal government’s housing ambitions.

“Achieving [the target] is in the realm of possibility, but not likely,” he said.

“One of the things that often gets done with that five-year target is to break it down — that means building this many per year, or this many per month — but these things are not uniform.

“We need to have an upward trend from here, not a downward trend, because we’re not keeping pace with that average. 

“We need year two, three and four to be stronger, not weaker, or we haven’t got a chance to get there.”


Leave a Reply

Your email address will not be published. Required fields are marked *