“Ugly” building approvals data released on Wednesday suggest Australia’s housing crisis is set to continue as the country faces record low rental supply amid an unprecedented surge in immigration.
Total dwelling approvals in September fell 4.6 per cent to 13,144, according to the latest figures from the Australian Bureau of Statistics (ABS), a 20.6 per cent year-on-year decline.
“ABS building approval numbers are ugly,” SQM Research founder Louis Christopher said on X.
“Down by just over 20 per cent year-on-year. Last month, just over 13,000 dwellings were approved. These approval numbers are putting us on track to complete about 135,000 dwellings for 2025.”
Mr Christopher noted that was a little over half the 240,000-a-year run rate required to hit the federal government’s target of 1.2 million completed dwellings over the next five years.
“At this rate, the target is very unlikely to be achieved,” he said.
Economists say record immigration is driving Australia’s housing crunch, which saw prices rise again in October to be on track for a 9 per cent year-on-year gain.
Net overseas migration came in at around 500,000 in 2022-23, more than double the 235,000 forecast in last October’s budget.
“The rebound in prices reflects a far worse than expected shortfall of supply relative to underlying demand for homes as immigration rebounded driving the fastest population growth rate since the 1950s at the same time that the supply of new dwellings slowed,” AMP head of investment strategy and chief economist Shane Oliver said in a note on Wednesday.
“This accentuated already tight rental markets, forcing rents up and driving renters to consider buying. So, demand improved but supply remains weak with total listings below normal. Talk of rising prices and shortages further boosted demand from less interest rate sensitive buyers.”
Dr Oliver said the constrained completion of new homes, driven by material and labour shortages and falling approvals, meant an ongoing rise in the “accumulated undersupply of housing, estimated to be 120,000 dwellings, rising to 190,000 dwellings by mid next year”.
“The government’s commitment to produce 240,000 dwellings a year over five years is great news but only starts from July 2024 and may struggle as we only completed 187,000 [per annum] over the last five years,” he said.
MacroBusiness chief economist Leith van Onselen said in an analysis on Thursday that there were only 174,400 dwellings constructed in Australia in 2022-23, against a total population increase of 626,000.
He noted the September dwelling approval figure had “badly missed economists’ expectations of a small gain of 2.5 per cent”.
“Further interest rate hikes could constrain construction activity further, leading to an even bigger gap between supply and demand,” he said.
“With net overseas migration running at a record rate of around 500,000 per year, implying population growth of more than 600,000, Australia’s housing crisis can only get worse. The only solution is to cut net overseas migration to a level that is below the nation’s ability to supply housing and infrastructure. It is patently obvious.”
Dr Oliver has also previously called for lower immigration to address housing affordability, saying “the role of high immigration levels can’t be ignored”.
“On our estimates it needs to be cut back to nearer 200,000 people a year to better line up with building industry capacity and to reduce the chronic housing supply shortfall,” he said in a September note.
It comes after a report on Monday showed Australia’s rental supply fell to a record low in September.
PropTrack’s latest Rental Report found new rental listings recorded a 5.7 annual decline, marking the fewest new listings in more than a decade.
The total number of properties listed for rent has fallen 22.8 per cent below the September average for the past five years.
“This scarce supply has pushed national median rents up 14.6 per cent over the past year, to sit at $550 per week,” PropTrack said.
The report also found that the national vacancy rate was also sitting at a record low of 1.1 per cent, down from 1.3 per cent a year earlier.
Meanwhile, new research this week found renters are paying on average a house deposit every five years in rent.
The research from the Parliamentary Library, commissioned by the Greens, compiled ABS data and estimated the average renter had paid $106,550 per household over the period.
A third of Australia’s roughly 10 million households are renters, a third own their home outright and a third have a mortgage.
Greens housing spokesman Max Chandler-Mather said for many, the cost of rent made it “impossible” to save for a deposit.
“Banks won’t give you a mortgage without a deposit, even though as this data shows, renters are already paying almost a housing deposit worth of rent every five years,” he said.
“In effect, renters end up paying off someone else’s mortgage while often copping massive rent increases that make it impossible to save for a house themselves.”
The average house deposit in Australia in 2023 is $159,000, according to SQM Research.
frank.chung@news.com.au
— with NCA NewsWire