There were 115,358 new houses approved for construction in 2022, down by 21.8% on the 147,552 approved in 2021, according to the Australian Bureau of Statistics’ monthly building approvals data for December for detached houses and multi-units covering all states and territories. Source: Timberbiz
This data included a 2.4% decline in house approvals in December 2022, to 8,989, the second weakest monthly performance in the last two-and-a-half years.
“Much of the decline between 2021 and 2022 was the expected consequence of the end of the HomeBuilder grant in 2021,” HIA Chief Economist Tim Reardon said.
“The market was also cooling as the cost of construction rose, and the change in consumer preferences due to the pandemic desire for space, eroded.
“The adverse impact of the fastest increase in the cash rate in a generation will not be fully observed in building approvals data until later this year and will not hit building activity on the ground until late 2023,” he said.
The significant pipeline of work that Australian builders were still completing, combined with ongoing materials and labour constraints, was creating significant lags between the RBA’s hiking cycle and on-the-ground activity.
“This lag, from the first rate rise until it impacts employment, is dangerously long in this cycle. The RBA needs to be very cautious in raising rates as the impact of their actions won’t be observed in official data for nearly 18 months, in this cycle,” Mr Reardon said.
“The multi-unit sector also contracted further between 2021 and 2022, despite the expected return of overseas migrants, students and tourists, and the ongoing tightness in rental markets.
“There were 73,407 multi-unit approvals in 2022, down by 7.2% from 2021.
“Increasing the number of multi-unit dwellings is critical to addressing the acute rental shortage across the economy.”
Meanwhile builders hope to see a sustained increase in high density dwelling construction which are driving early signs of a rebound in building approvals.
“December’s performance was driven by higher density homes, which jumped by some 58.8% during the month. Approvals for new detached houses dipped by 2.4% during December,” Master Builders Australia Deputy CEO Shaun Schmitke said.
“Higher density home building approvals are particularly sensitive to interest rate movements and have been on the way down over most of 2022 until a sharp jump in December.
“The stronger performance of medium/high-density home is welcome, and we hope this will be sustained as renters are crying out for more new apartments and units,” he said.
“Latest inflation data shows that rental costs are increasing at their fastest rate in a decade.
“Further increasing the supply of new apartments and units will be crucial to addressing housing affordability challenges in the rental market.
“Australia’s capacity to absorb the inward migration in the volume we need will depend on having an abundant supply of rental accommodation,” Mr Schmitke said.
For detached houses, the continued reduction in activity follows the achievement of record output during the pandemic.
“Detached house building is being held back by insufficient supplies of titled residential land,” Mr Schmitke said.
“We continue to work closely with governments in order to address some of these obstacles and achieve a sustained pipeline of projects, that are delivered on time and to the standards communities expect.
“Since the pandemic, demand for housing in regional markets has increased significantly. There are particular concerns that land supply bottlenecks are an obstacle when it comes to new home building which is impeding their wider development,” Mr Schmitke said.
In seasonally adjusted terms, total building approvals were down in all jurisdictions between 2021 and 2022, with the declines led by Western Australia (-36.3%), and followed by Tasmania (-20.3%), Queensland (-18.1%), New South Wales (-14.5%), South Australia (-13.1%), and Victoria (-12.6%). In original terms, total building approvals fell in the Australian Capital Territory (-4.6%) and rose in the Northern Territory (+5.2%).
