Building approvals plunge to lowest level in a decade

Tom Devitt, the senior economist for the Housing Industry Association (HIA), noted that the first quarter of 2023 was the weakest in terms of building approvals since 2012.

The drop in numbers was largely attributed to a 2.9 per cent decrease in approvals for new dwellings during the month, which fell to 180,893. This represents a 15 per cent decline from the same period last year.

Meanwhile, the number of semi-detached, row or terrace houses, townhouses, and apartment constructions that received a go-ahead increased 5.6 per cent in the month, reversing the 9.7 per cent decline in February.

However, across almost all states and territories, overall housing approval declines were significant over the quarter.

Data showed total building approvals were down across almost all the jurisdictions in the March quarter compared to the same period last year.

The quarterly declines were led by NSW (34.1 per cent ) and Victoria (26.6 per cent), followed by Western Australia (14.9 per cent), Tasmania (10.8 per cent), and South Australia (5.7 per cent ).

Only Queensland reported a quarterly increase of 8.6 per cent in building approvals.

Mr Devitt said the latest dwelling approval figures are the result of the long-lagged response of Australian home buyers to the interest rate hiking cycle and forecasted further declines in the coming months.

“The adverse impact of last year’s cash rate increases is still to fully flow through to the official data. Further cash rate increases this year will have only added further weight to these declines,” he added. 

He highlighted that the fall in dwelling approvals coinciding with the rapid population growth due to the return of overseas migrants, students, and tourists, spells bad news for the property market. 

“This imbalance [in supply and demand] will see the affordability and rental crisis deteriorate further,” Mr Devitt concluded.