A sharp fall in approvals for apartments and townhouses has dragged total building approval numbers lower, interrupting four months of gains.

Higher interest rates and pricey materials, labour and other costs have been weighing on home building, contributing to the weakest financial year for new dwelling approvals in 12 years, according to the Australian Bureau of Statistics.

In a more promising sign for sluggish home building, approvals for detached houses have been trending higher and are about 10 percent above mid-2023 levels.

During June, the bureau recorded a 6.5 percent fall in total dwelling approvals to 13,237 – the first decline since January and unwinding a 5.7 percent rise in May.

Approvals for private sector houses fell a modest 0.5 percent over the month, dragged lower by a significant 19 percent decline in NSW even as states such as Queensland recorded a 16.1 percent rise.

Private attached dwellings, which can be volatile month-to-month, fell a significant 19.7 percent to 9918 nationally, driven by Sydney and Melbourne.

But the worst was likely over for house approvals, with monthly volumes running about 10 percent higher than a year ago, Oxford Economics Australia senior economist Maree Kilroy said.

It was unclear when the apartment trough would hit, with the improvement expected to be slow as labour shortages constrained construction speed, Ms Kilroy said.

“We expect positive momentum to gain in 2025 with the pass through of interest rate cuts and policy support at both the federal and state government levels,” she said.

Federal and state governments want to ramp up home building under the national housing accord, targeting 1.2 million dwellings over five years starting from June.

Yet the government-appointed National Housing Supply and Affordability Council and other groups expect home building to fall short of the goal.

National Australia Bank senior markets economist Taylor Nugent said the 163,000 dwelling approvals over the past 12 months would be insufficient to meet targets, with 240,000 new homes needed each year.

Pressure on housing from rapid recent growth in the population was starting to ease, Mr Nugent said.

“But vacancy rates remain low and rents are going to remain a persistent source of inflation pressure,” he said.

Master Builders Australia CEO Denita Wawn said interest rates needed to stabilise and productivity in the industry boosted for home-building to pick up.

“It usually takes nine months to build a home, it’s now 15 months – high-rise density has gone from two years to three years,” she said.



Poppy Johnston and Dominic Giannini
(Australian Associated Press)

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