The latest ABS data indicate a 2.4 per cent drop in the number of new homes approved for building across Australia during April 2022. Compared with a year earlier, the volume of approvals is down by some 32.4 per cent.
Denita Wawn, CEO of Master Builders Australia said: “The sharp decline in approvals over the past year is the result of a number of factors. These include the phasing out of the HomeBuilder scheme as well as the emergence of challenges in the business environment. The cost of building materials is growing at its fastest rate in over 40 years while delays and shortages with respect to both labour and products continue to obstruct building activity.”
Better news for detached houses
One glimmer of good news is that demand for new detached house building is holding up reasonably well.
“There was a 0.5 per cent increase in approvals for detached houses during April and the level of activity is still a bit higher than it was immediately before the start of the pandemic,” Wawn said. “In contrast, approvals for medium and high-density homes are much lower than their pre-pandemic levels. April saw a 6.1 per cent drop in approvals in this category. We do expect demand for higher density homes to recover once inward migration to Australia moves closer to where it was before the pandemic.”
However, she is concerned by the Reserve Bank’s decision to substantially increase official interest rates.
“There are more than 420,000 building and construction businesses that have been weathering the storm of inflation in advance of the rest of the economy while also shouldering much of responsibility for completing economic recovery,” she said. “With the inflation challenge now facing the country it is important that the Federal Government makes use of both fiscal and monetary policy levers.”