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According to data released by the Australian Bureau of Statistics (ABS), the total number of dwellings approved decreased by 8.1 per cent in April, following a 1.0 per cent decline in March.
This decline brought the total number of approvals to just 11,600, the lowest monthly figure since April 2012, with the peak reaching 22,000 in April 2016.
The decline in building approvals was primarily driven by a 16.5 per cent fall in approvals for private sector dwellings excluding houses, which marked the lowest level since January 2012, ABS head of construction statistics Daniel Rossi said.
“Private sector house approvals also continued to decline, falling 3.8 per cent in April, following a 3.7 per cent decrease in March,” Mr Rossi said.
Interestingly, despite the decrease in the number of approvals, the value of total building approvals rose by 4.7 per cent (to $12.1 billion) in April, following a 5.7 per cent fall in March.
However, the value of total residential building approvals experienced a 2.5 per cent decline, to $6.5 billion.
The fall in building approvals coincided with a surge in construction costs since the pandemic, which has hampered building projects.
According to KPMG Australia’s analysis, building costs have spiked by 30 per cent, leading to project slowdowns.
Additionally, the tight labour market and significant increases in input prices have posed challenges in sourcing labour and caused cost blowouts in the building industry, AMP economist Diana Mousina added.
At the same time, rising interest rates have also contributed to decreased housing demand, she said.
While building activity had fallen for both detached and non-detached dwellings since 2021, Ms Mousina observed the fall had been steeper for apartments (non-detached dwellings), down by 34.9 per cent on a year ago.
Approvals for houses have also fallen by 18.2 per cent compared to the previous year, partially offset by government initiatives like the HomeBuilder subsidy.
“The problem now is that rising immigration and student arrivals means that the requirement for apartments is rising again,” she said.
A recent report by ANZ CoreLogic Housing Affordability Report noted the impact of strong overseas migration on rents was intensifying in capital cities, following a 25 per cent lift in rental prices since the pandemic.
Building approvals ‘critically low’: CBA
Thus, the low level of approvals for future housing supply has raised concerns among economists, given the already constrained supply in the market.
CBA senior economist Belinda Allen said the level of approvals for the future supply of housing is at “critically low levels” given the already constrained level of supply.
“The lack of new supply at a time when vacancy rates are low, household formation rates remain well below pre-pandemic levels and rapid population growth will mean rents, and home prices will continue to face upward pressure,” Ms Allen said.
As such, there is ongoing discussion regarding where and how new housing should be built, considering options such as green fields on the urban fringe or infilling existing urban areas with critical infrastructure, she said.
Dwelling approvals across Australia varied, with notable declines in Queensland (-22.8 per cent), Victoria (-18.6 per cent), and Western Australia (-5.8 per cent).
Conversely, rises were observed in South Australia (+19.8 per cent), NSW (+12.5 per cent), and Tasmania (+3.5 per cent).
Approvals for private sector houses fell in Victoria (-9.3 per cent), Queensland (-6.0 per cent), and NSW (-1.7 per cent), while South Australia (+10.8 per cent) and Western Australia (+0.1 per cent) experienced increases in April.
Another concern is the length of delays in completing past approvals, which is adding more pressure to the sector.
“There remains a large pipeline of work yet to be done, and not yet commence which is delaying new housing to the market,” Ms Allen said.
“The length of time between approvals and completions is also getting longer.”
HIA senior economist Tom Devitt said the “disappointing approvals numbers” are occurring as population growth surges with the return of overseas migrants, students, and tourists.
“This imbalance will see the affordability and rental crisis deteriorate further,” said Mr Devitt.
“This continues the long-lagged response of Australian home buyers to the RBA’s interest rate hiking cycle, with further declines expected in the coming months.
[Related: Housing affordability weighs on rental market]
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