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Approvals fall but builders still busy

The number of new homes approved for building across Australia continues to slide, down by a third compared to the same time last year.

Graphic with miniature building figures working on house set upon an architect's plan.
Detached house approvals continue to be elevated compared to pre-covid levels.

There was a further drop in the number of new homes approved for building across Australia during April 2022.

Latest ABS data indicates there was a 2.4 per cent drop in the total number of new homes receiving building approval during the month. Compared with a year earlier, the volume of approvals is down by some 32.4 per cent. 

Denita Wawn, CEO of Master Builders Australia said, “The sharp decline in approvals over the past year is the result of a number of factors, including the phasing out of the HomeBuilder scheme as well as emergence of challenges in the business environment.

“The cost of building materials is growing at its fastest rate in over 40 years while delays and shortages with respect to both labour and products continue to obstruct building activity.

“Even so, these figures do indicate that demand for new detached house building is holding up reasonably well - there was a 0.5 per cent increase in approvals for detached houses during April and the level of activity is still a bit higher than it was immediately before the start of the pandemic,” she said.

“In contrast, approvals for medium and high-density homes are much lower than their pre-pandemic levels.

“April saw a 6.1 per cent drop in approvals in this category and we do expect demand for higher density homes to recover once inward migration to Australia moves closer to where it was before the pandemic,” Ms Wawn said.

“For our industry, the most immediate challenge relates to the supply of building products and the people we need to carry out the work and we look to working with the new Federal Government to assist with finding and delivering solutions.”

Builders still busy

Detached house approvals continue to be elevated compared to pre-covid levels.

Multi-unit approvals increased by 7.4 per cent in the three months to April 2022.

Detached house approvals increased by 1.4 per cent in the three months to April 2022 to be 16.8 per cent higher than the same three months in 2019.

HIA Economist Tom Devitt said new work entering the pipeline will keep builders busy throughout 2023.

“At the end of 2021, there were 75.7 per cent more detached homes under construction than pre-covid and there are now more homes approved and waiting commencement than in any previous cycle,” he said.

Renovations activity also remains elevated. The value of renovations approvals jumped by 6.6 per cent in April to be up over the last 18 months by 42.6 per cent on pre-pandemic levels.

“Together with similar new home building and renovations booms in other developed economies, this has placed significant demands on the international supply of building materials, along with local supplies of land and labour,” Mr Devitt said.

“This has combined to create ongoing increases in the cost of construction.

“This will sustain Australia’s elevated number of homes and renovations under construction and keep Australia’s already-stretched home builders busy until at least June 2023.

“It will also delay the adverse impact of rising rates on the industry, and therefore the wider economy,” Mr Devitt said.

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