Crunch in building approvals sounds warning for Australia’s housing crisis

Opposition housing spokesman Michael Sukkar said the approvals data showed the government’s promise was drifting further out of reach.

“Australians are not blind to the fact that Labor is clutching at straws when it comes to the paltry housing announcements made over almost a full term in government,” he said. “There is no end in sight to Labor’s housing crisis.”

However, a government spokesperson noted building approvals were up 11 per cent for the year to November in trend terms (a measure that smooths out volatility), but knew there was more work to do.

“Our government has made huge investments to train more tradies, to invest in more infrastructure and to build more social and affordable homes,” the spokesperson said.

“[Opposition Leader] Peter Dutton has blocked every measure we’ve taken to build more homes and make housing more affordable. When we arrived in office, new building completions were at a near-decade low and now he’s promised to cut $19 billion from housing if he’s elected.”

AMP economist My Bui said building approvals trended up throughout 2024, reflecting stronger market confidence as construction cost growth eased and interest rates remained steady.

While approvals were more than making up for population growth, Bui said Australia still had a housing shortfall of about 200,000 dwellings based on AMP’s estimates.

NSW (down 10 per cent) and Victoria (down 13 per cent) saw the biggest falls in total dwelling approvals in November, while Western Australia recorded the highest growth at 18 per cent.

Commonwealth Bank economist Harry Ottley said the number of dwellings being approved nationally remained “well below” the amount required to ease the housing shortage and meet government targets.

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“Hitting government targets in the near term remains unlikely assuming no other major policy changes,” he said, but noted lowered interest rates would stimulate more building activity.

Financial markets have put the chance of a rate cut at the Reserve Bank’s first meeting of the year in February at 73 per cent.

CreditorWatch chief economist Ivan Colhoun said government policies aimed at slowing down population growth could help balance out new housing demand and supply if approval rates persisted.

“While the rate of population growth has been very elevated recently, reflecting catch-up immigration, holiday working visas and students, government policy changes should moderate the current rates of growth in excess of 500,000 per annum,” he said.

“But of course, this won’t immediately solve accumulated housing deficits, affordability or homelessness.”

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