Building approvals in January saw their biggest monthly slump in over eight years as the extreme weather that inundated Queensland and Victoria aggravated the slowdown.

Australian building approvals fell 15.9 per cent to 12,342 units in January, seasonally adjusted, from an upwardly revised 14,682 units in December, Australian Bureau of Statistics (ABS) data on Thursday showed.

The slump was well below market expectations for a 3.5 per cent decline.
Peak body for the building and construction industry says the big fall in dwelling approvals requires action on housing affordability.

A big fall in dwelling approvals in January puts the recovery in jeopardy and increases the need for government action to remove supply-side impediments that will otherwise have dire consequences for housing affordability, according to Master Builders Australia.

MBA chief economist Peter Jones said “The latest setback is not primarily due to weather events and more to do with household caution in the wake of rate rises by the Reserve Bank”

“The much anticipated upswing in residential building activity is now in doubt with further fallout expected to dampen prospects for a private sector revival in residential building.”

He said, “Residential builders continue to face financial constraints associated with the credit squeeze, meaning that investor-driven activity will struggle to ensure recovery in approvals of units and apartments.”

“A long and strong residential building upturn is desperately needed given that we have been underbuilding in Australia over the past six or seven years.”

“Even if approvals were to bounce back to an annualised rate of 190,000, the level of building would still be well below what is required to make inroads into the supply shortage.”

He said “Government policies are constraining the ability of housing supply to meet demand and without reform, the problem of housing affordability will only get worse.”

“Reputable commentators, including the Reserve Bank Governor have stated that unless there is urgent reform to address bottlenecks the strong supply response needed to meet demand will not eventuate.”

Master Builders wants the government to address inefficient developer charges, land release strategies and the approvals process as part of reforms to remove impediments affecting the supply of housing.