New data from the Australian Bureau of Statistics (ABS) revealed total dwellings approved rose a seasonally adjusted 1.9% to 12,947, picking up from 12,520 recorded in the month prior.
The latest read marks the first time approvals have risen after three consecutive months of decline.
Houses approved for construction rose in Victoria (up 3.2%) and Western Australia (up 1.5%), while falls were noted in Tasmania (down 18.1%), South Australia (down 7%), Queensland (down 5.2%), and New South Wales (down 1.2%).
Despite the upswing, homes approved for construction in March remain well below the 20,000 average monthly run rate of approvals required to meet the Albanese government’s target to build 1.2 million well-located dwellings by mid-2029.
The five-year plan is set to come into effect on 1 July.
Further, the latest noted recovery was not enough to pull the annual rate of approvals up, which is down 2.2% over the 12 months to March.
Apartment approvals bounce back, but still low
After plunging 24.9% in February, the number of multi-unit dwellings greenlit for construction picked up.
“Approvals for private sector dwellings excluding houses rose 3.6% in March in seasonally adjusted terms, following a 12-year low in February,” ABS head of construction statistics Daniel Rossi said.
However, looking at the annualised rate, the number of multi-units approved in the first three months of 2024 fell to its lowest volume since April 2012.
“Higher density housing development is being constrained by labour, material and finance costs and uncertainties, as well as cumbersome planning rules and punitive taxes, especially on foreign investors,” Housing Industry Association chief economist Tim Reardon said.
The continued slowdown of apartment approvals is expected to further squeeze the already tight Australian housing market, with supply unable to keep up with continuously growing demand.
“The mismatch between rising demand from migration and constraints on the supply of housing is likely to see the acute shortage of housing stock continue to deteriorate,” Mr Reardon added.
The discrepancy was evident over the 12 months to September when only around 174,000 new dwellings were completed against an underlying demand for around 264,000 houses.
“Given persistently low levels of dwelling approvals, the timeline of a material ramp up in completed housing supply is still a long way off, but there remains a substantial number of dwellings yet to be completed in the construction pipeline,” CoreLogic research director Tim Lawless noted.
More detached houses in the construction pipeline
Meanwhile, green shoots continue to emerge in private sector houses
Detached dwellings entering the construction pipeline rose 3.8% to 3,936, sustaining gains in February when approvals climbed 10.7%.
Approvals rose in Victoria (up 6%), NSW (up 4%), Queensland (up 3.2%), and SA (up 1.1%).
Houses greenlit for construction in WA tumbled by 1.8% following consecutive increases.
Despite the monthly downturn, the total number of approvals in WA over the three months to March is 33.2% higher than in the same quarter last year.
“Approvals for new houses in Western Australia contrast with the rest of the country and have been increasing steadily since mid-2023,” Mr Reardon noted.
The average approval value for a new house continued its annual rise to $468,800 per house, 4.2% higher than a year ago.
“Higher construction costs continue to weigh on dwelling approvals, with the average approval value for a new house rising in all states,” Mr Rossi said.
Worsening affordability is likely to continue as the RBA is expected to keep the cash rate at 4.35%, following a faster-than-expected rise in the cost of living in the first quarter of the year.
All four major banks are now pencilling in a later start to cash rate cuts – by November, at the earliest.
But Judo Bank’s Warren Hogan thinks otherwise.
On Tuesday’s Savings Tip Jar podcast, the neobank’s chief economic advisor said three cash rate hikes in 2024 may be necessary to bring inflation down to the Reserve Bank’s target of 2-3%.
This could bring the benchmark rate to 5.1%
Slow approvals drive property prices up
Even in the face of high interest rates, property prices continue to grow as the housing supply remains low.
Home values across Australia rose 0.6% in March, bringing the median dwelling price to $779,817.
Experts believe prices will continue to rise if new dwelling approvals don’t pick up the pace as soon as possible.
“The shortage of new housing is likely to persist, as new dwelling approvals have dropped to a nearly 12-year low [in February],” Domain chief of research Dr Nicola Powell said.
And with the time frames between dwelling commencement and completion “blowing out of proportion”, Dr Powell expects the ongoing scarcity to maintain pressure on the country’s housing supply.
Despite the less-than-ideal outlook, Mr Reardon maintains “it is possible” to build the Australian government’s target of 1.2 million homes over the next five years as long as “significant lowering of taxes on home building, easing pressures on construction costs, and decreasing land costs” are implemented.
Photo by presfoto on freepik
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