Housing Approvals Drop to 11-Year Low in Australia

Workers are seen on a building site in Sydney, Australia, on Jan. 11, 2024. (Jenny Evans/Getty Images)

Australia’s housing approvals have fallen to an 11-year low despite high demand, adding pressure to the housing market.

New data from the Australian Bureau of Statistics (ABS) showed that dwelling approvals dropped 1.9 percent in February 2024, following a one percent slip in January and a 9.5 percent drop in December 2023.

The decline was driven by the significant fall in private sector dwellings.

“Approvals for private sector dwellings excluding houses fell 24.9 percent in February, driven by a fall in the number of approved large apartment projects,” said ABS head of construction statistics Daniel Rossi.

“Approvals for private houses rose 10.7 percent in February.”

Master Builders Australia, a peak industry body, raised concerns that the low housing approval rate would make it unlikely for the government to achieve its housing target.

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“Over the year to February, just 163,100 new homes received approval across Australia—the lowest in 11 years,” Master Builders Australia chief economist Shane Garrett said.

“This stands in stark contrast to the annual target of 240,000 new homes under the National Housing Accord.

“For us to achieve this calibre of housing output, approvals would need to increase by 48 percent on current levels.”

Master Builders Australia CEO Denita Wawn echoed Mr. Garrett’s concerns, saying there was a mismatch between the number of homes coming through the pipeline and the rising demand for housing.

The CEO stressed the urgency for policymakers to unlock the housing supply through targeted measures.

“Resolving supply constraints should be the focus of all political parties in fixing our housing crisis. Until they are addressed, Australians will continue to struggle with housing affordability,” she said.

“We must ensure that sufficient support is provided to encourage investment in housing development. This includes steering clear of changes that would dampen the investment environment.”

What Causes Low Housing Approvals?

Peter Tulip, the chief economist at the Centre for Independent Studies, said the low housing approval rate was due to high interest rates and soaring input costs.

These two factors have caused developers’ equity to shrink and lenders to withdraw finance, promoting delays or cancellations in development projects.

“In hindsight, developers paid too much for their land,” Mr. Tulip told The Epoch Times.

“So many developments are being postponed until the developer can rebuild their equity or sell the land (at a loss) to better-capitalised competitors.”

The Reserve Bank of Australia is currently maintaining the official cash rate at 4.35 percent, a 12-year high, after embarking on an aggressive monetary tightening cycle in May 2022.

According to Mr. Tulip, the most cost-effective way to boost housing approvals was for state governments to override local council objections and require the councils to approve more buildings.

“There are many potential building sites where extra zoning permission is not needed, but there are also very many where extra zoning permission is needed,” he said.

“The recent New South Wales government proposals for Transport Oriented Development are a good example of what is needed. This policy should be copied in other states.”