In an unwelcome setback for the Australian housing market, building approvals have plummeted to an 11-year low, posing a significant obstacle to the nation’s housing and rental crisis resolution efforts1. Private sector house approvals have continued their downward trend, dropping 3.8% in April, which follows a 3.7% decrease in March1. This slowdown in construction activity could further exacerbate Australia’s housing and rental crisis in the near to mid-term1.
The decline in construction rates has raised concerns among industry experts and stakeholders. Master Builders Australia, a leading industry association, warns that the slowed pace of construction could jeopardise Australia’s ability to meet its housing targets1. The recent dips in new home building approvals follow a year marked by escalating interest rates and inflation at a 30-year peak, the Acting CEO of Master Builders Australia, Shaun Schmitke, pointed out1.
Compounding the issue, the most significant reductions were observed in higher density home building approvals and home renovations, with decreases of 16.9% and 26.6%, respectively. Despite the surging demand for medium and high-density housing, the pipeline for new stock is rapidly shrinking1. Consequently, the decrease in new builds could intensify pressures in the rental market, with rent payments taking up an increasing portion of income – a trend not seen since June 20141.
In response to the crisis, the Albanese Government has committed to building one million homes over five years starting from 20241. However, looming challenges in the construction industry and rapid population growth – partly due to record high immigration – could potentially hinder these efforts1.
The construction sector plays a crucial role in supporting economic growth and meeting the housing needs of Australia’s burgeoning population. Addressing the crisis will require a careful examination of the impact of government regulations and policies on the cost of building homes and social infrastructure1. As Australia grapples with these complex challenges, it is clear that a multi-faceted approach will be necessary to ensure that the housing market can keep pace with the demands of a rapidly growing population.