Dwelling approvals remain near decade lows

The latest Australian Bureau of Statistics (ABS) data on Building Approvals for the month of December 2023 has shown a decline in dwellings approved of 9.5 per cent after the 0.3 per cent rise recorded in November.

This has brought the total number of dwellings approved to 13,085, with private sector houses falling by 0.5 per cent to 8,416 and private sector dwellings excluding houses dropping by 25.3 per cent to 4,354.

The trend estimates for total dwellings approved fell by 0.1 per cent after a 0.7 per cent decrease in November, according to the ABS.

Daniel Rossi, ABS head of construction statistics, said: “Approvals for private sector dwellings excluding houses drove the December decline.

“In 2023, there were 59,174 private other dwellings approved, compared to 73,041 in 2022. This reflects a 19.0 per cent annual fall.

“Approvals in less volatile, private sector houses, fell 0.5 per cent in December.”

Victoria, South Australia, and Tasmania recorded declines in total dwellings approved of 18.4 per cent, 11.8 per cent, and 2.7 per cent, respectively. Meanwhile, Queensland, Western Australia, and NSW recorded increases of 8.2 per cent, 7.9 per cent, and 2 per cent.

According to the ABS, private sector house approvals were driven lower by falls in South Australia (5.3 per cent), NSW (2.6 per cent), and Queensland (0.4 per cent), while increases were seen in Western Australia (2.2 per cent) and Victoria (1.2 per cent).

Additionally, the values of new residential and non-residential buildings both fell by 3.8 per cent to $6.03 billion and 10.6 per cent to $4.32 billion.

The total value of buildings approved fell by 6.4 per cent after the decline of 10.4 per cent recorded in November.

Commonwealth Bank of Australia (CBA) economists Stephen Wu and Harry Ottley commented that at just over 13,000 buildings approved, the level of approvals nationally “is near decade lows”.

“Higher interest rates, building costs and constraints in the construction industry are a disincentive for developers to invest in new projects,” they said.

“The more significant planning process involved in larger projects also means that multi-unit dwelling activity takes longer to respond to stimulatory policy such as the monetary easing we expect later this year.

“This is likely contributing to approvals for apartments and town houses looking a little soggier than detached dwellings at this juncture.

“Unusually in this cycle, the pandemic boom in approvals has not yet translated into a material rise in completions and thus more supply coming online.

“This has contributed to the housing shortage Australia currently faces amid strong population. It does however mean that despite the weak approvals numbers at present, there remains a large pipeline of construction work to be done.

“Our view is that approvals will pick up albeit marginally this year in response to a more gradual increase in the cash rate in H2 23 and policy being on hold before easing in 2024.”

[RELATED: Dwelling commencements fall to decade low]