Building approvals can’t keep up with record immigration

Australia’s record level of immigration is outpacing new construction, which means the housing crisis is only going to get worse according to an expert.

According to the Australian Bureau of Statistics (ABS), building approvals fell one per cent nationally in January.

Housing Industry Association Chief Economist, Tim Reardon, said the low volume of building approvals throughout 2023 will see the volume of homes commencing construction continue to slow this year.

“Approvals have been declining since the first increase in the cash rate in mid-2022 and this trend appears to be continuing into the start of 2024,” Mr Readon said.

“Approvals have declined across all jurisdictions, however, there is an increasing divergence among the jurisdictions as the rise in the cash rate falls disproportionately on those markets with higher land costs.”

The number of approvals for private sector houses declined 9.9 per cent from December 2023 to January 2024.

Approvals for all types of dwellings dropped 1 per cent from December 2023 to January 2024, due to a 14.5 per cent increase in the number of non-house approvals, such as apartments.

In the 12 months to January 2024, total approvals for private sector houses were below 100,000 for the first time since 2013.

The only state to see an increase in building approvals in the three months to January was WA, which saw an increase of 26.4 per cent, while all other states and territories declined.

Source: ABS

Deputy Executive Director of the Institute of Public Affairs (IPA), Daniel Wild said Australia’s ballooning population was too high for the current levels of housing construction, which will lead to a disaster for renters and home buyers.

“Governments at all levels are setting Australia up for an economic and humanitarian disaster, as latest dwelling approvals show we are simply not building enough houses for first home buyers and new migrants alike, despite record intakes,” Mr Wild said.

The ABS data follows analysis by the Housing Industry Association, which revealed a housing construction shortfall of 200,000 dwellings against the Federal Government’s target of building 1.2 million homes over the next five years.

IPA research found that there will be a net housing supply shortfall of 252,800 dwellings over the six years to 2028.

Mr Wild said the ABS data highlighted the real-world consequences of unplanned, record levels of migration.

“Despite repeated warnings, the Federal Government continues to push the accelerator on migration at the exact same time as the brakes are being slammed on housing approvals,” he said.

Source: IPA

Mr Wild said that 2023 was the first year in Australia’s history that more than one million migrants entered the nation.

“The current unplanned migration intake is placing immense pressure on housing and our critical infrastructure, and has not solved our worker shortage crisis,” he said.

“IPA research has found the Federal Government’s migration program is growing out of step with community expectations. 

“Polling showed 60 per cent of Australians want migration paused until more housing and infrastructure is built. 

“Only 23 per cent did not want a pause, and 17 per cent unsure.”

Mr Wild said record, unplanned migration had failed to address Australia’s worker shortage crisis, the very thing the Federal Government uses to justify such rapid increases in intake.

“It is clear this lazy approach to solving worker shortages is not working and there should be a greater focus on getting Australian pensioners, veterans, and students into work,” he said.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.