This week’s fresh home-building stats have put the industry back on track as approvals near two-year highs, but more needs to be done if we hope to hit housing targets.
The latest stats from the Australian Bureau of Statistics (ABS) have finally delivered some consistently good news to builders as the industry continues its steady climb out of the construction hole left in the wake of the pandemic lockdowns.
Over October, home building approvals climbed a further 4.2 per cent on September’s already impressive 4.4 per cent gain, bringing the industry back on par to where it was in December 2022.
Economists put these ‘surprisingly strong’ figures down to the massive 22.4 per cent growth in high-density builds – a 17-month high – overshadowing the slight five per cent drop in approvals for new detached dwellings.
However, Master Builder Australia economist Shane Garrett said that while it was clear new home building had “won momentum”, it was obvious the industry would have to pull a hail mary play if they hoped to hit the government’s lofty Housing Accord goals of 1.2 million homes by July 2029.
Introduced in July of this year, the Accords home building promises were touted as Labor’s fix to Australia’s overpriced and undersupplied housing market. But as construction commenced amid speculations of crippling tradie shortages and supply chain issues, it quickly became clear Albanese might have bitten off more than he could chew.
Fast forward only six months later, and the current yearly approval rate of 169,000 new homes has put the country on track to only produce 847,000 homes over the next five years – over 350,000 homes short of the National Housing Accord target.
“We’re not there yet”
While this month’s improvement in high-density build is a promising reversal for what Garrett described as “years of underbuilding of new apartments and units”, Master Builders CEO Denita Wawn said we would need to see this level of output “increased and sustained” over a longer period of time.
“To get the policy settings right and create an environment where the building and construction industry can get the job done, we need governments at all levels, across a range of portfolios, working together in a “whole-of-government” approach to housing,” she said.
“Last week saw the passage of crucial Help to Buy and Build to Rent legislation but there’s still a long way to go and more policy reform is needed.”
If the government does fail to provide some radical boost to the industry’s productivity over the coming years to make good on their housing promises, Garrett said it would be everyday Australians paying the price.
“Failing to deliver the much-needed homes is having a real cost on Australians,” he said.
“The year to October 2024 saw rents increase by another 6.7 per cent on already onerous levels.”
“Australians are struggling with inflation and the rising cost of living, we need to see genuine action on housing that will bring down those stresses,” added Ms Wawn.
“Only a collaborative effort on housing will get Australians the cost-of-living relief they need.”
If builders can keep up the current home-building pace heading into January though, CreditorWatch’s chief economist Ivan Colhoun said a drop in interest rate could be on the cards for mortgage holders in early 2025 as the RBA continues to curb inflation.
“The RBA has recently signalled that it will likely require two favourable inflation reports (with trimmed mean CPI at 0.7 per cent or below) before it is confident that inflation will return to target, and it can consider lowering interest rates,” he told Build-it.
“This means the first interest rate cut is unlikely before May 2025, unless there is a significant downturn in the job market, which is not expected at this time.”
