a critical look at falling approvals

The housing sector in Australia is at a crossroads.

With housing approvals at their lowest since August 2009, we’re facing a situation where the current housing shortage could worsen unless decisive action is taken.

The challenges at hand

Several factors are creating a perfect storm in the housing sector.

According to Eleanor Creagh, Senior Economist at PropTrack, “Higher financing costs, a surge in material and labour costs, and an increase in insolvencies within the building industry have contributed to a significant decline in new project approvals.”

Ms Creagh believes that this downturn isn’t just a blip on the radar; since late 2021, approvals have consistently trended downward.

In fact, according to ABS data, the 12 months leading up to January 2024 saw a 13.3% decrease compared to the previous year, reaching a troubling decade low with just 166,401 new dwellings approved.

Ms Creagh said that a crucial point to understand is that approvals don’t always translate into completions.

Historically, about 17% of approved projects haven’t materialized, a trend that’s been more pronounced in the last two years.

Private Sector Dwelling Approvals

This gap is partly due to the slower pace of building and a backlog of approved homes still awaiting completion.

On average, it takes just over three months from approval to commencement for houses, with townhouses and apartments taking longer.

Once construction begins, a detached house typically takes just over nine months to complete, with longer times for other types of dwellings.

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