Building approvals remain short despite hitting five-month high
A temporary pause in interest rate hikes has seen building approvals rise to a five-month high but remain at their lowest levels since 2013 by year-to-date figures.
Providing analysis on the monthly data, chief economist Shane Garrett says the total number of new home building approvals rose to 14,223 in seasonally adjusted terms during October.
“This was up 7.5% on the previous month and represents the highest result since May. October’s solid gain came in the wake of the four-month pause in RBA interest rate hikes,” Shane says.
“During October, there was a particularly large increase in the volume of higher density home building approvals (up by 19.5%). This is important because the rental market is currently in desperate need of more medium and high-density homes.”
Shane says the shortage of rental accommodation was the recent driver behind inflating the rental price to its fastest pace in almost 15 years, and that delivering more increases in higher density housing output will help to further dilute rental market pressures.
“New detached house approvals saw modest growth of plus 2.2% during October. However, activity on the detached housing side of the market remains at a low ebb due to development-ready land shortages and the detrimental effect of interest increases,” Shane says.
Over a year to date, 166,236 homes have been approved, well short of the 200,000 homes required, according to Master Builders Australia chief executive Denita Wawn.
With interest rate rises expected to be back on the move, and an industrial relations Bill before Parliament, Denita cautioned that positive gains could be quickly eroded.
“While some states and territories are making strides at the planning level, the federal government is adding extra cost layers to building through their new IR laws, undermining the efforts of housing ministers,” Denita says.
“We saw the Albanese Government and the Greens brush off the housing crisis and pass damaging reforms that threaten the rights of independent contractors, subcontractors and self-employed tradies to be their own boss. Unless we make concerted efforts to quickly boost housing supply and reduce the cost of building new homes, we will continue to see the housing and rental crisis worsen.”