Annual building approvals down 22%: ABS

“This data included a 2.4 per cent decline in house approvals in December 2022, to 8,989, the second weakest monthly performance in the last two-and-a-half years,” he added.

Mr Reardon predicted that only towards the tail end of the year will we begin to fully observe “the adverse impact of the fastest increase in the cash rate in a generation,” adding it won’t hit building activity until late 2023.

“The significant pipeline of work that Australian builders are still completing, combined with ongoing materials and labour constraints, is creating significant lags between the RBA’s hiking cycle and on-the-ground activity.”

As a result of this, he believes the Reserve Bank of Australia (RBA) should proceed with caution regarding interest cash increases “as the impact of their actions won’t be observed in official data for nearly 18 months in this cycle.”

It wasn’t just Australia’s free-standing housing sector that copped the brunt of declining activity, with the ABS revealing the “multi-unit sector also contracted further between 2021 and 2022,” even despite the anticipated return of migrants, international students and tourists throughout the year as international travel and migration return to pre-COVID normality.

The multi-unit sector saw a 7.2 per cent approval decrease from 2021 to 2022, when there were 73,407.

“Increasing the number of multi-unit dwellings is critical to addressing the acute rental shortage across the economy,” he added.

Seasonally adjusted terms revealed total building approvals were down in all jurisdictions between 2021 and last year, led by Western Australia’s 36.3 per cent decline, followed by Tasmania (20.3 per cent), Queensland (18.1 per cent), NSW (14.5 per cent), South Australia (13.1 per cent), and Victoria (12.6 per cent).

In original terms, total building approvals fell 4.6 per cent in the ACT but rose 5.2 per cent in the Northern Territory.

Last month, the ABS revealed new home commencements reached record highs in the three months to September 2022 after a 0.6 per cent increase from June.