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New dwelling commencements near decade low

New home starts across the country declined last quarter, with the building industry worried a lack of new supply will exacerbate the housing crisis.

According to the Australian Bureau of Statistics (ABS), total new dwelling commencements dropped 6.7 per cent, to 41,374 dwellings, during the December 2022 quarter and are now close to their lowest level in a decade.

New private sector house commencements fell 2.3 per cent to 28,330 dwellings, while other new residential commencements in the private sector dropped 16.5 per cent to 12,053 dwellings.

Master Builders Australia Chief Economist Shane Garrett said despite the large number of new homes still under construction at the end of December, a total of 238,475, there were simply not enough new projects entering the pipeline to keep up with demand.

“During the quarter, there was a 2.4 per cent reduction in new detached house starts, while higher density home commencements plunged by 21.7 per cent,” Mr Garrett said.

“For apartment and unit commencements, the volume of new starts has dropped to its lowest in over 10 years.”

Mr Garrett said that 172,400 new homes were completed across Australia during 2022, 3.6 per cent fewer than in 2021. 

“This is well below the volume of new home building required to meet Australia’s housing needs over the coming years,” he said.

Master Builders Chief Executive Officer Denita Wawn said the shrinking size of the new home-building pie was concerning.

“Building and construction activity makes a substantial contribution to the Australian economy,” Ms Wawn said.

“Reverses in new home building will subtract from Australia’s overall rate of economic growth.

“Higher-density home building has sunk to its lowest in a decade at a time when inward migration is soaring to unprecedented levels. 

“This combination is likely to further exacerbate rental market pressures.”

Ms Wawn said a strong building industry was 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,” she said.

“Despite the strong intention of both governments and industry to reach a target of one million homes under the Housing Accord, the data highlights that more needs to be done to tackle labour shortages and other supply constraints to speed up the delivery of new homes.

“More needs to be done to speed up the delivery of new housing in the medium and high-density part of the market over the short-term.” 

She said government efforts to expand the stock of social and affordable housing will provide welcome support.

“Builders continue to face regulatory burdens and prolonged delays in approvals for building applications, occupation certificates and land titles,” Ms Wawn said.

“Additionally, land shortages in the wrong places, high developer charges and inflexible planning laws are restricting opportunities to meet demand, speed up project timelines, and minimise costs to both builders and their clients.”

Mr Garrett said we had already seen rental inflation accelerate to its fastest pace since 2012.

“Latest inflation figures show that rents are now bucking the trend in accelerating at a time when most cost pressures are easing back,” he said.

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Rowan Crosby

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

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