A decline in housing approvals has cast serious doubt on the federal government’s ambitious plan to build 1.2 million homes in five years.
Approvals fell 1 per cent in January to a seasonally adjusted figure of 12,850, according to figures released last week by the Australian Bureau of Statistics (ABS).
This followed an even sharper decline of 9.5 percent in December, with the trend line for residential permits falling to the lowest level since May 2012.
Approvals for new homes in Australia are slumping, casting serious doubt on the federal government’s pledge to build 1.2 million homes in five years
To achieve the Albanian government’s targets, 20,000 homes will have to be built every month from July this year until June 2029.
If current trends continue, only about 136,000 homes will be built annually, which is significantly lower than the 240,000 homes needed annually to meet the 1.2 million target.
A recent report on rental affordability by property sector analyst PropTrack said the government’s plan seemed ‘unlikely’ to hit the promised figures.
“This means we are likely to continue to see an undersupply of homes to buy and an undersupply of homes to rent,” the report said.
What makes the situation even bleaker is that approvals do not necessarily indicate how many houses will be built, as some projects will be abandoned before completion, and this figure is also rising.
“Just because a project is approved for construction does not necessarily mean it will proceed,” the PropTrack report said.
“Over the past two years, approximately 17 percent of approved projects have not progressed to completion.”
PropTrack said this was a historically large decline and was driven by labor and material shortages as well as financing costs with interest rates at a 12-year high.
The difficult market conditions have caused a whole series of construction companies to go bankrupt, with almost 1,400 construction companies going bankrupt in the second half of 2023.
According to corporate regulator the Australian Securities and Investments Commission, this was an increase of 29 percent compared to the same period in 2022.
Another factor clogging the new home pipeline is red tape, said Denita Wawn, CEO of Master Builders Australia.
The construction industry is struggling with a combination of labor and material shortages plus planning and other financial problems
“We need state and territory governments and local authorities to resolve zoning and planning issues,” she told Nine News.
In February, billionaire property developer Harry Triguboff threatened to stop building apartments in his home state of NSW due to frustration with planning authorities.
Mr Triguboff, founder and director of property giant Meriton Apartments, blamed “arrogant” planning authorities in NSW who do not understand the need to make a profit for delaying new homes the state urgently needs.
“Our developers go bankrupt more than anyone else,” he wrote in an op-ed for The Australian.
‘They can’t all be stupid. So I believe that the authorities should consult with developers, otherwise we will never be able to meet the demand.”
Prime Minister Anthony Albanese said his government’s housing plan would reduce rising rents
Economist Leith van Onselen says record levels of immigration to Australia mean the housing crisis will only worsen.
“Australia’s population has increased by a whopping 680,000 people over the past calendar year,” he told Sky News on Wednesday.
“That’s the equivalent of about one and a half Canberras.
Combined with the relatively low number of homes built, this could only cause problems, according to the ABS figures.
“We have only added one home for every 4.5 new residents,” says Van Onselen.
‘And as a result, data published by Domain last week showed that the national rental vacancy rate has fallen to a historic low of just 0.7%.’
The Albanian government has pledged $3.5 billion to achieve their housing ambitions, which will be distributed among states based on the number of new homes they build.
It has also established the $10 billion Housing Australia Future Fund 20,000 new social rental homes.
When Albanese announced the housing targets last year, he said they would help bring down rising rents.
“This is an initiative that shows how serious we are as state and territory governments across the political spectrum and as the Commonwealth in recognizing that supply is key,” Albanese said.
“That’s the key to putting downward pressure and helping tenants.”