Last year, 115,358 new houses were approved for construction – that’s down by 21.8% on the 147,552 approved in 2021, according to ABS’ monthly building approvals data for December.
“This data included a 2.4% decline in house approvals in December 2022, to 8,989, the second weakest monthly performance in the last two-and-a-half years,” HIA Chief Economist Tim Reardon said.
“Much of the decline between 2021 and 2022 was the expected consequence of the end of the HomeBuilder grant in 2021. The market was also cooling as the cost of construction rose, and the change in consumer preferences due to the pandemic desire for space, eroded.”
Reardon said the adverse impact of the fastest cash rate hike in a generation will not be fully observed in building approvals data until later this year and will not hit building activity on the ground until late 2023.
“The significant pipeline of work that Australian builders are still completing, combined with ongoing materials and labour constraints, is creating significant lags between the RBA’s hiking cycle and on-the-ground activity,” he said. “This lag from the first rate rises until it impacts employment is dangerously long in this cycle. The RBA needs to be very cautious in raising rates as the impact of their actions won’t be observed in official data for nearly 18 months, in this cycle.”
The multi-unit sector also further declined in 2022, despite the expected return of overseas migrants, students, and tourists, as well as the ongoing tightness in rental markets.
“There were 73,407 multi-unit approvals in 2022, down by 7.2% from 2021,” Reardon said. “Increasing the number of multi-unit dwellings is critical to addressing the acute rental shortage across the economy.”
In seasonally adjusted terms, total building approvals fell in all jurisdictions between 2021 and 2022, ABS data showed. Western Australia led the declines, with -36.3%, followed by Tasmania (-20.3%), Queensland (-18.1%), NSW (-14.5%), South Australia (-13.1%), and Victoria (-12.6%). In original terms, total building approvals dropped in the ACT by -4.6% and rose in the NT by +5.2%.
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