Approvals hit 19-month low
Dwelling approvals plummeted by a record 27.9% in January, hitting a 19-month low of 12,916 units.
The drop is another blow to the construction industry, which is already dealing with the fallout of the Probuild collapse and the slowing residential property market, The Australian reported.
The drop in building approvals was the biggest monthly percentage fall since records began in 1983. Council approvals to build private-sector houses fell 17.5% in January, the largest drop since 2000.
Approvals for private-sector dwellings excluding houses – primarily apartments – dropped 43.6%, the most in nearly a decade, according to The Australian.
The drops were especially harsh in New South Wales, which posted a 25.9% fall, and Victoria, which posted a 35.5% drop. Queensland rose slightly by 0.5%, South Australia saw a heavy fall of 29.2%, and Western Australia posted a 19.9% drop.
CommSec senior economist Ryan Felsman told The Australian that the slump was driven partly by Omicron-related disruptions and the summer holidays. He also said rising fixed mortgage rates and affordability issues were constraining home price growth.
“That said, the total number of building approvals is generally in line with pre-COVID levels after the HomeBuilder stimulus surge in housing activity in 2021,” Felsman said.
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Felsman told The Australian that the data indicated that new residential housing supply would peak in 2022/23, then begin falling.
“Unfortunately, this could place upward pressure on rental prices, and therefore push up overall inflation,” he said.
Timothy Hibbert, principal economist at BIS Oxford Economics, said approvals for both private houses and attached dwellings dropped sharply in January. He said that the surging costs of construction labour and material were beginning to bite, with the average cost of approved houses up 19.6% nationally over the year to January.
“With the backlog of work continuing to escalate, cost pressures and delays are set to persist all the way through 2022 and into 2023,” Hibbert told The Australian.
However, Hibbert said he expected building activity to bounce back.
“We expect the January data to be an outlier, with approvals rebounding sharply over the following months,” he said. “HomeBuilder, very low interest rates, and elevated pressure on the housing stock will continue to support dwelling construction at a historically elevated level deeper in 2022.”
