- Building approvals increased by 4%, driven by an 11.3% rise in approvals for houses
- High density building approvals fell by 9.5%, to the lowest level since July 2012
- The value of new loan commitments for housing declined by 0.9%
Builders have seen a rebound in demand in February, with new data showing that building approvals rose 4%, however, demand for home loans continues to slide.
According to the Australian Bureau of Statistics (ABS), the jump in building approvals comes off the back of a 27.1% fall in January.
ABS head of construction statistics, Daniel Rossi said, “This increase was driven by an 11.3% rise in approvals for private sector houses, after a 10-year low in January. The result remains 13.6% lower than February 2022.”
“Private sector dwellings excluding house approvals fell a further 9.5% in February, following a 40.3% decline in January, and is at its lowest level recorded since July 2012.”
“Total dwelling approvals have continued their downward trend since September 2022, following the conclusion of government stimulus and rising interest rates.”
Across Australia, total dwelling approvals increased sharply in Tasmania (+122.1%), while South Australia (+28.5%), New South Wales (+14.0%) and Victoria (+8.5%), also rose. Queensland (-13.7%) and Western Australia (-6.4%) fell in seasonally adjusted terms.
Approvals for private sector houses rose in all states: Queensland (+18.8%), Victoria (+10.3%), New South Wales (+9.9%), Western Australia (+2.4%), and South Australia (+1.6%).
The value of total building approvals rose 19.7%, following a 19.2% fall in January. The value of total residential building approvals rose 7.7%, comprised of an 8.4% increase in new residential building and a 3.7% rise in alterations and additions.
Dwelling units approved, by building type, seasonally adjusted
Demand for detached homes
Master Builders Australia (MBA) chief economist Shane Garrett said much of the new building work is coming from detached homes.
“Higher density home building approvals retreated again with a 9.5% decline during February. The volume of new approvals on the higher density side is now at its lowest in over a decade. The output of new higher-density homes has been depressed since before the pandemic,” he said.
Garrett said inadequate volumes of new supply are also contributing to growing difficulties in our rental market.
“Rents are currently rising at their fastest pace in over a decade. As today’s new report from NHFIC shows, the insufficient home-building output will only magnify the challenges around housing affordability.”
Master Builders Australia CEO Denita Wawn said, “Rising interest rates and declining sales for new home construction is weakening the pipeline of new housing. A strong building industry is the foundation of a strong economy.”
“The inextricable ties between construction activity and the broader health of the economy are again on display in the current environment. To achieve better housing affordability and keep up with demand, changes need to be made to the way we do things, now and over the long term.”
Wawn said the government needs to take the necessary steps to ensure interest rates do not need to rise any further and take some of the heavy lifting of our correction off mortgage holders and business owners.
“From here, there are no easy choices. There is no silver bullet; this will take a concerted effort by all levels of government working in collaboration with industry.”
Lending declines
Meanwhile, lending data showed a decline in January as higher interest rates continue to bite.
According to the ABS, the value of new loan commitments for housing fell 0.9% to $22.6 billion in February after a revised fall of 2.4% in January.
ABS head of Finance and Wealth, Dane Mead said: “The value of new owner-occupier loan commitments fell 1.2% to $15.0 billion in February 2023, while the value of new investor loan commitments fell 0.5% to $7.6 billion.
“Housing finance continued to decline from the record highs in January 2022, with the total value of new loan commitments falling 33% since then.”
The value of owner-occupier housing loan refinancing between lenders rose 3.5% to a new record high of $13.6 billion in February 2023. Borrowers continued to switch lenders for lower interest rates as the RBA’s cash rate rose Mr Mead said.
“Owner-occupier first home buyer lending continued to decline from the high reached in January 2021, to the lowest level seen since May 2017. It was also 27% lower than February 2020, prior to the COVID-19 pandemic.”
