The Albanese government’s target to build 1.2 million homes over five years is looking increasingly delusional.
The latest dwelling construction indicators from the Australian Bureau of Statistics (ABS) showed that approvals, commencements and completions are tracking at around decade lows:
In the year to March 2024, 171,700 homes were completed in Australia, 68,300 fewer than Labor’s 240,000 annual construction target.
The forward-looking indicators are worse.
In the year to March 2024, 158,900 dwellings commenced construction, 81,100 fewer than Labor’s target.
Meanwhile, only 163,300 dwellings were approved for construction in the year to June 2024, 76,700 fewer than Labor’s target.
Buyer demand for new homes also remains highly depressed.
As illustrated in the following chart, only 4,725 loans were issued for the purchase or construction of a new home in June. This was 15% fewer than the historical (22-year) average:
The next chart from Justin Fabo at Antipodean Macro also shows that new detached house sales remain at historical lows:
The slump in new home sales is tracking building approvals, which are equally soft:
As we know, the Albanese government’s 1.2 million housing construction target is predicated on there being a boom in high-rise construction.
However, the latest dwelling approvals data is discouraging, showing that high-rise approvals are tracking at more than decade lows across NSW, Victoria, and nationally:
The reality is that macroeconomic conditions are unconducive to a construction boom owing to:
- Elevated interest rates;
- The 40% rise in construction costs since the beginning of the pandemic;
- The high level of insolvencies in the construction industry; and
- The building industry competing for labour and materials with government ‘big build’ infrastructure projects.
Given that the supply-side will remain constricted for the foreseeable future, the only solution to Australia’s housing shortage and rental crisis is to drastically cut net overseas migration.
