Dwelling approvals up but still ‘well below target’
The number of homes approved to be built saw an uptick in the month of May – a good sign for our housing and construction landscape.
As outlined by the Australian Bureau of Statistics (ABS), the total number of dwellings approved rose 5.5 per cent in May. This was higher than the 1.9 per cent rise seen in April.
Leading this charge was private sector dwellings, excluding houses, which according to ABS “includes semi-detached, row or terrace houses, townhouses and apartments”.
ABS head of construction statistics, Daniel Rossi, commented on the data: “The rise in approvals in May was driven by private sector dwellings excluding houses which rose 16.3 per cent … Private sector house approvals also rose by 2.1 per cent.”
As of May, the total number of dwelling approvals hit 14,175. However, figures are still down from the same time last year, with May 2023 seeing 15,500 total dwelling approvals.
The Housing Industry Association’s chief economist, Tim Reardon, said there is more to be done to reach the government’s housing goals.
“There have been 163,760 total dwelling approvals over the most recent 12 months to May 2024. This is well below the 240,000 new homes needed each year from 1 July 2024 to achieve national cabinet’s goal.”
“The low approvals numbers indicate a slow start to building 1.2 million homes over the next five years. Increasing the number of homes built will be necessary to address longstanding housing shortages … Addressing tax, planning, land and regulatory constraints will be necessary to increasing the supply of homes in Australia,” said Reardon.
Approvals rose across all states, with Western Australia seeing the largest rise of 19.6 per cent. Following was Victoria (8.9 per cent), Queensland (6.3 per cent), South Australia (4.1 per cent), Tasmania (3.8 per cent) and NSW (2.9 per cent).
Maree Kilroy, senior economist at Oxford Economics Australia, noted results for 2024 are promising, especially in Western Australia.
“The latest ABS Building Approval release showed national total dwelling approvals in seasonally adjusted terms gained 5.5 per cent to 14,175 in May. This was the strongest result in six months.”
“Western Australia is off and racing. Demand fundamentals are robust, including annual population growth near 3.5 per cent for Perth. Dwelling supply is also coming off a low base. This mismatch has triggered a surge in existing home prices that is positively filtering through to new dwelling demand,” said Kilroy.
However, agreeing with Reardon, Kilroy said figures are still “well below target”.
“From the January 2024 low point, dwelling approvals have gained every month since. We have passed the worst for house approvals. But there are still question marks to whether apartments have troughed. Momentum is set to gain in 2025 with the pass through of interest rate cuts and policy support at both the federal and state government levels,” she said.
“With the shift into FY2025, new dwelling supply is now counting towards the National Housing Accord 1.2 million dwelling target. Allowing for a normal level of drop out to project completion, approvals need to average around 20,800 per month. Despite some recent improvement, we are obviously still tracking well below target.”
Private sector houses painted a different picture, with a mix of rises and drops across the country. Western Australia once again rose, hitting 8.4 per cent, followed by NSW (5.9 per cent) and Queensland (3.7 per cent). In contrast, Victoria fell by 3.4 per cent and South Australia by 1.9 per cent.
Values saw a rise throughout the month too, with buildings approved climbing 0.6 per cent to a total of $13 billion. April, however, saw a 0.7 per cent drop, highlighting a slight turnaround.
The value of total residential building rose 2.3 per cent, reaching a total of $7.6 billion. According to the ABS, this was made up of a 4.4 per cent rise in new residential building and a 9.3 per cent fall in alterations and additions.
Non-residential building value saw a drop of 1.6 per cent to $5.4 billion. This was in contrast to a 0.7 per cent rise in April.