The decline in the home building industry is set to continue deep into 2023 after November data from the Australian Bureau of Statistics (ABS) revealed another sharp fall in approvals of apartments, home units, townhouses and the like and a smaller drop in approvals for private sector houses.
The ABS data showed a 9% drop in November in total dwelling approvals to 13,898 following October’s 5.6% drop and a 5.8% fall in September. Total approvals are now down 15% year on year and a massive 41% from the peak in March 21 of 23,522 which were boosted by the final rush for approvals of HomeBuilder subsidies.
A combination of the absence of any government support programs and rising interest rate (and mortgage) and building costs are the culprits behind the continuing slide in approvals.
The fall in approvals since the peaks of early 2021 and the surge in building costs in the past year or so, helps explain why so many small and medium home builders and construction companies have collapsed in the last 18 months.
The higher interest rate costs in 2021 have added financial pressures at a time when the sector didn’t want them.
The result was driven by a 22.7% slide in approvals of private sector dwellings excluding houses (ie home units flats, apartments etc). Private sector house approvals fell 2.5%.
Private sector house approvals are now down more than 13% on a year ago while non-private dwelling approvals (flats, units etc) are down 21%.
“The November result is the third consecutive month of declines for total dwelling approvals, having fallen 21.7 per cent since August,” the ABS’s Daniel Mr Rossi said. August saw a 28% jump in approvals.
Across Australia, total dwelling approvals fell in New South Wales (-18.4%), Western Australia (-17.5%), Victoria (-12.7%), and Queensland (-5.6%), while Tasmania (75.7%) and South Australia (10%) saw increases. The Tasmanian figure was not really relevant as it is a very small market and obviously due to a bunching of approvals by a local governments.
The ABS said approvals for private sector houses fell across most states, with Victoria (-8.0%), Western Australia (-6.1%), South Australia (-2.6%) and Queensland (-1.2%) seeing falls, while NSW saw a 1.2% rise.
The value of total building approvals fell 1.5% in November, following a 0.4% drop in October.
The value of total residential building approvals fell 4.0%, comprising of a 3.1% decrease in new residential building and a 9.2% fall in alterations and additions.
