January dwellings fall driven by private house approvals: ABS

The latest data on building approvals released by the Australian Bureau of Statistics (ABS) has revealed the number of dwellings approved dropped by 1 per cent in January 2024 (seasonally adjusted) to 12,850.

This followed a 10.1 per cent fall in December and was primarily driven by a fall in approvals for private houses, which fell 9.9 per cent during the month to 7,461.

ABS head of construction statistics, Daniel Rossi, stated that private sector houses have “fallen for four consecutive months” in trend terms.

“Meanwhile, approvals for private sector dwellings, excluding houses, rose 19.5 per cent in January in seasonally adjusted terms, driven by a rise in apartment approvals in Queensland,” Rossi added.

Looking at the states, January’s total dwelling approvals delivered mixed results with declines recorded in NSW (14.9 per cent), Victoria (9.8 per cent), and South Australia (7.2 per cent).

Increases in dwelling approvals were recorded in Queensland (31.8 per cent), Western Australia (11.4 per cent), and Tasmania (5.1 per cent).

However, private sector house approvals fell in all states, led by a 16.7 per cent fall in Victoria, followed by NSW (13.1 per cent), Western Australia (7.3 per cent), Queensland (1.7 per cent), and South Australia (0.4 per cent).

Meanwhile, the value of total buildings approved recovered after declines in the previous month, with an increase of 14.7 per cent in January following a 6.7 per cent drop in December.

Total residential building values rose 16.1 per cent, comprised of a rise in the value of new residential buildings by 19.4 per cent to $7.14 billion, and a 12.4 per cent rise in the value of non-residential buildings to $4.92 billion.

Housing Industry Association (HIA) chief economist Tim Reardon said the trend of declining approvals since the beginning of the cash rate hiking cycle appears to be continuing into the start of 2024.

“The low volume of building approvals throughout 2023 will see the volume of homes commencing construction continue to slow this year. The rise in the cash rate is the primary cause of this slowdown in approvals.

“Approvals have declined across all jurisdictions, however, there is an increasing divergence among the jurisdictions as the rise in the cash rate falls disproportionately on those markets with higher land costs,” Reardon said.

Commonwealth Bank of Australia (CBA) economist Harry Ottley stated the majority of the upswing of dwellings approved during the COVID-19 pandemic “has not yet materially translated into a material rise in housing stock, further exacerbating the housing shortage”.

Ottley added this comes as completions have lagged, “beset by delays and constraints in the construction industry”.

“The pipeline of work to be done has grown significantly and there is uncertainty when and if the work will be completed. We are seeing the impact on rents, vacancy rates and existing home prices,” he added.

[RELATED: Construction loan volumes hit record low in 2023]