Sydney city
Pixabay

Australia's construction industry fears that the decline in housing approvals from the government could lead to targets not being met.

New data released by the Australian Bureau of Statistics (ABS) revealed a 6.5% decrease in new home approvals in June, with states like New South Wales being the worst affected.

The Master Builders Australia (MBA) has warned that if the situation persisted, Australia will fail to achieve its National Housing According target, which pledged to build 1.2 million new homes by 2029, by 385,000 homes, ABC reported.

Michael Fotheringham from the Australian Housing and Urban Research Institute noted that the number of housing approvals was often linked to the number of applications submitted.

"We continue to invest in new houses, and new units, the dollar doesn't stretch as far as it used to in purchasing them," he said. "So we're getting less from the same equivalent amount of expenditure."

The housing sector is experiencing a lack of labor and materials, which is why the average approved value of new homes has increased by AU$19,444 between June 2023 and June 2024, ABS said in a report.

"Private sector houses fell by 0.5% in June. The fall was mainly driven by New South Wales which fell 19.0%. With the latest figure of 1,597 private houses approved, this is the lowest recorded figure for New South Wales since January 2013." Daniel Rossi, ABS head of construction statistics, said.

"Over the past 12 months, there have been a total of 162,892 dwellings approved, compared to 177,936 in the 12 months prior, representing a 8.5% decrease, in original terms. This is the lowest number of dwellings approved on a financial year basis since 2011/12," he said.

"Private sector dwellings excluding houses fell by 19.7% in June, reaching the second lowest monthly level recorded since January 2012. The June figure represents a yearly fall of 22.1% compared to the same month last year. Conditions for apartments remain challenging owing to high construction costs and higher interest rates."

The housing market has experienced multiple setbacks due to issues ranging from skyrocketing house-building costs, slower construction timelines, and placing budget strain on buyers and investors, giving rise to a housing affordability crisis.

Fotheringham clarified that neither a dearth of demand nor a drop in consumer confidence affected the housing market. Rather, the primary concern was supply chain issues surfacing following the COVID-19 epidemic.

"There's an appetite there but the costs have gone up. So really, you know, what we need to look at is how do we start to improve on the costs of material suppliers," he said.