November Sees Decline in Australian Building Approvals
Building approvals in Australia fell unexpectedly in November, raising concerns about the nation’s ability to meet growing housing demands fueled by surging immigration. The Australian Bureau of Statistics (ABS) reported a 3.6% drop in total dwelling approvals, down to 14,998, following a 5.2% increase in October. Economists had predicted a milder decline of 0.9%.
Challenges for Housing Supply Amid Economic Pressures
Housing supply remains a pressing issue in Australia’s economy, particularly ahead of the federal election due by mid-May. Elevated interest rates and rapid population growth, driven by immigration, have kept housing prices high, even as the Reserve Bank of Australia (RBA) maintains tight monetary policy to combat inflation. Rising rents have further exacerbated the cost of living crisis.
“Over the past three months, approvals have been running at an annualized pace of 181,000 dwellings, which is 5.2% higher than a year ago and above population growth rates of around 2.0% to 2.5%,” said My Bui, economist at AMP. However, the pace of approvals remains insufficient to address housing shortages in the near term.
Government’s Efforts and Future Outlook
The Labor government has pledged to significantly increase housing supply to alleviate the affordability crisis. However, experts predict meaningful recovery may take time. “We don’t expect a more meaningful double-digit recovery in total approvals until 2026, when mortgage rate cuts aid the release of pent-up housing demand, while traction on the supply policy front will become increasingly evident,” said Timothy Hibbert, head of property forecasting at Oxford Economics.
The RBA is expected to begin easing monetary policy this year, with speculation around potential rate cuts as early as February. Lower rates could provide some relief for prospective homebuyers and stimulate housing demand.
Data Breakdown and Regional Variations
The November decline in approvals affected all residential building types, according to the ABS. Approvals for private-sector houses fell by 1.7%, while approvals for private dwellings excluding houses dropped by a sharper 10.8%. Despite these declines, total dwelling approvals were still 3.2% higher than in November 2023.
Queensland was the only state to report growth in private-sector house approvals, recording a 4.3% increase in November. This contrasted with a 4.0% decline in October, showcasing regional disparities in housing activity.
Bottlenecks in Construction and Supply Chain Issues
Utility connection delays and trade labor shortages continue to pose significant challenges to housing construction, slowing the recovery in supply. These constraints are likely to persist in the medium term, limiting the speed of housing delivery even as demand remains robust.
Value of Approved Projects Rises Despite Volume Decline
In contrast to the decline in the number of approvals, the value of total building approvals rose by 6.6% in November to AUD 14.32 billion (approximately USD 8.94 billion), following a 2.3% decline in October. This suggests that higher-value projects, including commercial developments, may be offsetting the drop in residential approvals.
As policymakers and industry stakeholders grapple with the complexities of housing supply and affordability, the outlook for Australia’s property market remains uncertain, with meaningful recovery expected to take several years to materialize.
