New construction approvals continue to fall. What's behind the home-building slump?

Megan Lieu 3 Jun 2022

For two consecutive months now, approvals to build new dwellings have fallen and there's one major factor driving the slump.

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The most recent Building Approvals release from the Australian Bureau of Statistics shows that there has been a 2.4% decrease month-on-month in the number of dwellings that have been approved.

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The main driver of this was a 6.1% fall in apartment and semi-detached approvals.

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A comparison between the past six months (November 2020 to April 2022) and the previous six months (May 2021 to October 2021) shows a 14% decrease in dwelling approvals.

The construction industry is experiencing challenging conditions, with record rises in input costs. But what is causing this?

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There are a few contributing factors.

First, the government’s HomeBuilder scheme, coupled with historically low interest rates, brought an influx of demand as many Aussies sought to build a new home.

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Secondly, there has been a shortage of key building materials. COVID-19 outbreaks around the world led to the closures of factories and ports, limiting production and delaying transportation.

The shortage of labour and equipment has also led to a backlog of projects, with companies having to delay builds or put them on ice.

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With the HomeBuilder scheme now retired, interest rates expected to increase further, and input costs not anticipated to abate in the near term, building houses and apartments is set to remain more expensive for some time to come.