2024 to hit 10-year low for new house starts

Multiunit approvals showed some improvement, increasing by 19 per cent in the month of October, but this result is still 19 per cent lower than the long-run monthly average and 14 per cent lower than 12 months ago.

Given these figures, the construction sector is raising red flags about the health of the industry in the year ahead, especially in light of the fact that every state and territory in the country is expecting to be ramping up building to commence on the target of creating 1.2 million new dwellings in five years starting in July 2024.

“This [month’s figures] leave house approvals over the last three months down by 11.2 per cent compared to the same quarter last year, and around its lowest levels of the last decade,” said Tom Devitt, senior economist at the Housing Industry Association.

He noted that with a backlog of work going into the interest rate rises that commenced in mid-2022, the construction industry somewhat obscured the immediate impact of those rises on the home building sector.

“Australian home builders had a significant pipeline of work under or awaiting construction when the RBA [Reserve Bank of Australia] started increasing interest rates in May 2022. This pipeline has kept Australians employed and the economy going for over a year, obscuring the impact of the sharpest rate hiking cycle in a generation.

“This pipeline is now shrinking and in 2024 home builders will be starting construction on fewer new houses than at any time in the last decade,” Mr Devitt said.

In his view, the RBA has been “impatient” in wanting to see progress in its lagging indicators, namely a rise in unemployment and a faster decline in inflation.

“The unfurling of global supply chains for home building materials and fuel will have eliminated most of Australia’s excess inflation by the end of this year.

“The RBA’s interest rate increases will suppress home building and spending across the broader economy next year by much more than would have been necessary to get inflation over the line into the RBA’s 2–3 per cent target range,” Mr Devitt stated.

Col Dutton, national president of the Urban Development Institute of Australia, said that with Australia’s housing crisis in sharp focus, building approvals needed to rise as a matter of urgency.

“The reality is that instead of unlocking land supply and fast-tracking approvals, we have less approvals than we did 12 months ago and this needs to be reversed as a priority,” Mr Dutton said.

And he noted that the reality on the ground is even more grim.

“UDIA analysis indicates that there is a 22 per cent attrition rate between approvals and actual dwelling completions, which means the drop in housing is greater than the numbers suggest. We urgently need to boost housing supply across the entire continuum and especially housing for the vast majority of ordinary Australians facing cost-of-living pressures,” he said.

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