Housing crisis: New apartment approvals drop to 15-year low in Victoria | ABS

An alarming drop in Victorian apartment approvals has slashed the number of new units being planned to the lowest level since 2009, and it could have a worrying effect on house prices.

A “shocking” plunge in Victorian apartment approvals has slashed the number of new units being planned to the lowest level since 2009.

It comes as a nationwide downturn dragged the total number of Aussie homes being given the nod to 162,892 over the past year, a 15,000 decline from June 2023 and the lowest number for a financial year since the 2012 financial year.

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The declines have industry watchers worried about how builders will reach construction targets set by federal and state governments, which were just revealed in the latest Australian Bureau of Statistics housing approvals data.

In the 12 months to June 30 this year there were just 7419 new apartments given the green light for development across the state.

New units construction in Melbourne has slowed to a 15-year low.

A year ago it was more than 10,300 and at its peak in 2018 Victorian developers were winning approval to build more than 22,000 new apartments a year.

New house approvals were relatively flat across the state, with about 33,500 given the nod in the past 12 months.

Overall, there were 51,497 homes approved Victoria wide in the past year, almost 4000 fewer than a year ago and the lowest number for a financial year since 2013.

Oxford Economics commentator Maree Kilroy said the Victorian numbers were “shocking” and put a significant question mark over the state’s prospects of hitting its ambitious housing targets.

“If we are going to reach these targets it will be through higher density, and those figures are just shocking,” Ms Kilroy said.

While she said the rest of the nation’s house approvals were at a turning point, she warned Melbourne and Victorian numbers were likely to languish for some time yet.

“It’s not a pretty picture any time soon,” Ms Kilroy said.

But she said more housing approvals were likely once homebuyers saw the cost of building as more affordable than purchasing an established home, which could occur next year.

However analysis of the ABS data also shows that the typical value of apartments being approved in Victoria soared to a more than $699,000 record in June — $200,000+ above the cost of a typical house construction approval for the same period.

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Housing Industry Association chief economist Tim Reardon warned they were expecting approvals to continue to decline through to the end of this year, and noted most of the reduction would mean fewer affordable homes.

HIA expects approvals to continue to decline through to the end of 2024.

Mr Reardon said this was a result of more affluent buyers being able to proceed despite what happened with interest rates and building costs, while more cost-sensitive first-home buyers and investors would delay.

However, the economist said for those who could afford to build a new house today — now was the time to do so as builders were making “very sharp” offers to boost their pipeline.

Property Council of Australia policy and advocacy group executive Matthew Kandelaars said the national 1.2 million homes target by 2029 now faced “challenges” and if efforts to build more homes did not accelerate the goal would be missed.

“To achieve our goal of 1.2 million homes, we need to adopt a proactive mindset and pull every lever available to unlock more supply – including new homes for students, renters and retirees,” Mr Kandelaars said.

Master Builders Australia CEO Denita Wawn added that while clearly needed to be done, the industry was hopeful a recent federal government ministerial reshuffle would bring a “whole of government approach to the housing crisis”.

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Originally published as Housing crisis: New apartment approvals drop to 15-year low in Victoria | ABS