The Australia Bureau of Statistics has released February 2023 data for building approvals and lending figures, which show only a four per cent increase in the number of new homes approved.
Detached house building approvals drove the improvement with a gain of 11.3 per cent during the month.
However, as Master Builders Australia Chief Economist Shane Garrett noted, higher density home building approvals had retreated, with a 9.5 per cent decline during February.
Garrett said: “The volume of new approvals on the higher density side is now at its lowest in over a decade.
“The output of new higher density homes has been depressed since before the pandemic.
“Inadequate volumes of new supply are contributing to growing difficulties in our rental market.
“Rents are currently rising at their fastest pace in over a decade.
“Insufficient home-building output will only magnify the challenges around housing affordability.”
In seasonally adjusted terms, the total number of homes approved in February 2023 declined in most jurisdictions compared to the same month a year earlier.
This was led by Victoria (-45.0 per cent) and New South Wales (-42.2 per cent), followed by Western Australia (-22.2 per cent) and South Australia (-8.9 per cent).
Queensland (+14.7 per cent) and Tasmania (+11.8 per cent) saw increases, while in original terms, declines were seen in the Australian Capital Territory (-62.3 per cent) and the Northern Territory (-35.5 per cent).
The Housing Industry Association’s Chief Economist Tim Reardon said with the new data, there could be no justification for further rate increases.
Reardon said: “February saw the fewest loans issued for the purchase or construction of a new home in almost 15 years.
“Loans for new homes in February fell even further from its holiday low in January, down by 3.4 per cent to 4,267. The last time so few loans were issued for new homes was in November 2008.
“Owner occupiers and investors, alike, continue to retreat from the market. Even lending for renovations – the part of the sector expected to hold up relatively well during this downturn – had its weakest month in almost two years.
“The impact of the RBA’s tightening cycle has been evident in weakening finance data for a number of months and this is now flowing through to building approvals that are also around decade lows.
“The large pool of building work that existed when the RBA started to increase the cash rate in May 2022, has been eroded.
“This slowing in home building will undermine the achievement of the Australian government’s target of one million new homes over the next five years and with migration at record levels, affordability will deteriorate further.
“Every state and territory needs to take action to attract remove blockages in the housing sector to improve the supply of new homes.”