Crunch in building approvals sounds warning for Australia’s housing crisis

Prime Minister Anthony Albanese has defended his plan to deliver 1.2 million homes by 2029, rejecting claims that a fall in building approvals late last year could jeopardise progress.

After fresh data showed a bigger-than-expected fall in building approvals, Albanese said both the federal government and state governments in NSW and Victoria were helping to improve housing supply.

The number of approvals was 3.2 per cent higher in November compared to the same time in 2023. But it remained at half the level from between 2015 and 2019.Credit: Arsineh Houspian

“We have an ambitious plan, yes, for 1.2 million homes for Australia,” he said on ABC News Breakfast. “That’s why we put in place our Housing Australia Future Fund and housing accelerator to deliver increased social housing [and] our build-to-rent legislation. Every single one of those measures was opposed by the Coalition.”

Albanese’s comments come as the major parties battle to win voters’ trust on housing, a key issue ahead of an election this year. Data from the Australian Bureau of Statistics released on Tuesday showed building approvals slipped 3.6 per cent to 14,998 dwellings in November.

The prime minister dismissed the figure as a “month-to-month issue”, saying it was more informative to look at the annual change in approvals.

“[For] the year-to-year data, there was an increase of more than 3 per cent. That’s a positive outcome ... that shows there are more approvals occurring.”

Approvals fell 1.7 per cent for private-sector houses and 10.8 per cent for other dwellings, including units, from October to November. While approvals were 3.2 per cent higher in November compared to the same time in 2023, they remained at half the level seen between 2015 and 2019.

Soon after taking office, the government set a target of 1 million new homes to be built between mid-2024 and mid-2029. It has since lifted that to 1.2 million in a bid to deal with spiralling house prices and rents. To meet its goal, Labor needs an average of 240,000 new homes built each year.

Deloitte Access Economics and Oxford Economics last year warned the government was likely to fall more than 200,000 homes short of its target by the end of the decade.

Opposition housing spokesman Michael Sukkar said the approvals data showed the government’s promise was drifting further out of reach.

“Australians are not blind to the fact that Labor is clutching at straws when it comes to the paltry housing announcements made over almost a full term in government,” he said. “There is no end in sight to Labor’s housing crisis.”

However, a government spokesperson noted building approvals were up 11 per cent for the year to November in trend terms (a measure that smooths out volatility), but knew there was more work to do.

“Our government has made huge investments to train more tradies, to invest in more infrastructure and to build more social and affordable homes,” the spokesperson said.

“[Opposition Leader] Peter Dutton has blocked every measure we’ve taken to build more homes and make housing more affordable. When we arrived in office, new building completions were at a near-decade low, and now he’s promised to cut $19 billion from housing if he’s elected.”

AMP economist My Bui said building approvals trended up throughout 2024, reflecting stronger market confidence as construction cost growth eased and interest rates remained steady.

While approvals were more than making up for population growth, Bui said Australia still had a housing shortfall of about 200,000 dwellings based on AMP’s estimates.

NSW (down 10 per cent) and Victoria (down 13 per cent) saw the biggest falls in total dwelling approvals in November, while Western Australia recorded the highest growth at 18 per cent.

Commonwealth Bank economist Harry Ottley said the number of dwellings being approved nationally remained “well below” the amount required to ease the housing shortage and meet government targets.

“Hitting government targets in the near term remains unlikely assuming no other major policy changes,” he said, but noted lowered interest rates would stimulate more building activity.

Financial markets have put the chance of a rate cut at the Reserve Bank’s first meeting of the year in February at 73 per cent.

CreditorWatch chief economist Ivan Colhoun said government policies aimed at slowing down population growth could help balance out new housing demand and supply if approval rates persisted.

“While the rate of population growth has been very elevated recently, reflecting catch-up immigration, holiday working visas and students, government policy changes should moderate the current rates of growth in excess of 500,000 per annum,” he said.

“But of course, this won’t immediately solve accumulated housing deficits, affordability or homelessness.”

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