New home approvals hit fresh decade low as surging costs stifle new builds

Just 166,127 new dwellings were approved for construction in the year to November, fresh ABS data has shown.

Building approvals have sunk to their lowest level in more than a decade, as the soaring cost for materials, land, finance and labour stifle the construction of new homes.

In the year to November, just 166,127 new dwellings were approved for construction, according to new seasonally adjusted figures released by the Australian Bureau of Statistics on Tuesday.

Not since the year to June 2013, when 165,327 new dwellings were approved, has the annualised number of new homes signed-off for construction been so low.

The fresh figures come as the nation faces the worst housing crunch in decades, as a rebound in house prices risks undermining the dream of home ownership while limited rental stock further undermines affordability, particularly in capital city markets.

Not since June 2013, has the number of new homes signed off for construction been so low. Picture: NCA NewsWire / Ian Currie

Despite the annual decline in new dwelling approvals, which slumped 4.6 per cent, the data showed a 1.6 per cent rise across November, eclipsing economists’ forecasts for a fall of 2 per cent across the month.

The increase was largely due to a surprise gain in approvals from apartment and townhouse approvals, which rose 6.7 per cent over November, rather than for new detached houses which sank 1.7 per cent.

Commonwealth Bank economist Harry Ottley said while the level of building approvals remained subdued, there was a modest upward trend beginning to unfold.

“There are some green shoots emerging,” Mr Ottley said.

“The slower pace of tightening from the RBA is likely supporting approvals from very low levels. If monetary policy is eased this year, approvals can increase more materially given there remains high underlying demand for new housing amid the current shortage.”

In a promising sign for the sector, the number of approvals edged up slight across the month of November. Picture: NCA NewsWire / Roy VanDerVegt

Despite the uptick in monthly approvals, ANZ senior economist Adelaide Timbrell said prevailing economic conditions were continuing to hamper stronger gains.

“Higher funding and building costs are keeping approvals from rising meaningfully,” Ms Timbrell said.

Australia’s population growth, which has soared by 642,953 in the year to November, has far outstripped slower building approvals, prompting analysts to warn pressures on supply and rental costs would continue for some time yet.

NAB senior economist Taylor Nugent warned that a “supply fix for the housing shortage is not coming in a hurry,”

“But very elevated population growth is set to normalise back to pre-pandemic rates over coming quarters and household size and space-per-person are adjusting as households, especially renters, respond to the real income squeeze by adjusting their housing consumption.”

Originally published as New home approvals hit fresh decade low as surging costs stifle new builds